Farm Credit West 2013 Annual Report

www.farmcreditwest.com

2013 Annual Report

Farm Credit West will ensure The Customer Comes First by providing superior service at competitive rates, in a timely, professional, and ethical manner.

Administrative Office

1478 Stone Point Drive, Suite 450Roseville, CA 95661 916.780.1166800.909.5050

Capital Markets

1446 Spring Street, Suite 201Paso Robles, CA 93446805.237.0998

Carpinteria

1135 Eugenia Place, Suite ACarpinteria, CA 93013805.684.8771

Dinuba

531 N. Alta AvenueDinuba, CA 93618 559.591.9378

Hanford

1111 W. Lacey BoulevardHanford, CA 93230 559.584.2681

Kern County

19628 Industry Parkway DriveBakersfield, CA 93308 661.399.7360

Santa Maria

1178 Tama Lane Santa Maria, CA 93455 805.922.7991

Templeton

175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665

Tulare

200 E. Cartmill AvenueTulare, CA 93274 559.684.1478

Ventura

2031 Knoll DriveVentura, CA 93003 805.477.1020

Woodland

440 Pioneer AvenueWoodland, CA 95776 530.666.3333

Yuba City

900 Tharp RoadYuba City, CA 95993 530.671.1420

Office Locations

Letter to Shareholders 2

It’s Your Money 5

Our Story 6

Financial Highlights 8

Five-Year Summary of Selected Financial Data 11

Management’s Discussion and Analysis 12

Report of Management 29

Report of the Audit Committee 30

Independent Auditor’s Report 31

Consolidated Financial Statements 32

Notes to Consolidated Financial Statements 37

Disclosure Information Required by Farm Credit Administration Regulations 59

TABLE OF CONTENTS

2013 Annual Report

2 | FARM CREDIT WEST

Farm Credit West’s “THE CUSTOMER COMES FIRST” mission is paired with our commitment to the farmers and ranchers we serve, the experience of our employees, and your trust in our ability to deliver results.

Nowhere are the rewards of this mutually beneficial combination of experience, commitment, and trust more apparent than in the positive real-life results you’ll find in this, our 2013 Annual Report to Shareholders. Before you read the details, we are proud to share some snapshots of success:

•Net income was $156 million in 2013. Essentially all earnings were from core operations. This compares with $151 million the year before, of which $145 million was from core operations with an additional $6 million resulting from a non-recurring insurance refund. Most of our growth in earnings came from asset growth.

•Average earning assets grew $332 million, or 5.5%, in 2013. This is the highest level of growth we have seen since 2009. Average earning assets grew $254 million, or 4.4%, in 2012.

•Asset quality trend is improving, with 95.5% nonadversely classified loans at year-end 2013, compared with 94.7% at the end of 2012.

•Our primary regulatory capital measure is the core surplus ratio. This ratio started the year at 13.6% and rose to 14.4% by the end of 2013, reflecting growing capital strength and thus more stability to weather uncertain economic times.

Positive results in all of these key measures led to your Board’s decision to declare a cash patronage distribution at 0.75% of average customer borrowing. That equated to $53 million in cash returned to our customers in February 2014, a tangible example of our value-driven philosophy.

Patronage is just one of the many unique features of our cooperative structure. Another is our system of governance, where each year our voting customer-owners have a say in selecting a governing board made up of local farmers and ranchers. Who better to guide your cooperative in its mission to serve agriculture? Your Board recognizes the responsibility that comes with their position. Foremost is recognition that Farm Credit West must be financially sound to weather the ups and downs

Letter to Shareholders

2013 ANNUAL REPORT | 3

Your Board recognizes the responsibility that

comes with their position. Foremost is recognition

that Farm Credit West must be financially sound

to weather the ups and downs of agriculture.

of agriculture. Accordingly, decisions are made with a long-term perspective to ensure that Farm Credit West continues to provide value for future generations of farmers and ranchers, as it has for nearly a century.

The power of the cooperative model is also demonstrated by the collective strength of the Farm Credit System (System). On a combined basis, the System posted 2013 net income of $4.6 billion and ended the year with $261 billion in total assets, both records for the System. And when many financial institutions were near collapse during the recent 2008–2009 financial crisis, the System continued to report record or near-record earnings and asset growth year after year. Consequently, the System has been rewarded for its financial strength and conservative governance by strong support in the financial markets and thus ready access to low-cost capital to fund our customers’ borrowing needs.

CommittedOur commitment to you is to provide superior service at competitive rates in a timely, professional, and ethical manner. We utilize our annual customer satisfaction survey to assess how we are doing in meeting that commitment. In 2013, we mailed 1,994 surveys and 925 were returned for a high response rate of 46%. The overall service rating from respondents was favorable, exceeding the target we established in our 2013 business

plan. Once again, 99% of respondents indicated they would recommend Farm Credit West — a tremendous accomplishment for your customer-owned cooperative. Your favorable opinion validates our commitment to serve agriculture each and every day.

Another way Farm Credit West shows our commitment to you, the agricultural community, is with nearly $600,000 in stewardship support to education, research, local food programs, industry support, and youth programs in 2013 alone. In addition, Farm Credit West’s 200 employees gave over 7,500 hours of community service in 2013 to many of the same agricultural and community organizations and causes. As a member of the Farm Credit System, we are a mission-based lender whose commitment to agriculture today, in the past, and in the future will always be dedicated to the success of the agricultural and rural communities.

ExperiencedFarm Credit West prides itself in attracting and retaining employees committed to serving agriculture and the mission of the Farm Credit System. To exemplify our staff ’s experience and dedication to the success of Farm Credit West, you need only look at their commitment to the organization. The nine executive management members pictured on page 7 represent on average 25 years of service to either Farm Credit West or the Farm Credit System. Our key lending staff, represented by 55 portfolio managers and

lending vice presidents, have on average 20 years of service to either Farm Credit West or the Farm Credit System. We feel this kind of experience and emphasis on long-term relationships makes us unique among lenders in California.

INDUSTRY SUPPORT$358,000 (60%)

YOUTH PROGRAMS$179,000 (30%)

EDUCATION &RESEARCH

$63,000 (10%)

Supporting our community with stewardship dollars

TrustedTime and again our customers tell us they trust Farm Credit West. They show their confidence in our financial strength by entrusting us with their hard-earned funds, either in the form of a capital investment in our Preferred Stock program, or for more short-term needs in our Future Payment Fund program. Customer utilization of these programs continued to grow. Combined Future Payment Funds and Preferred Stock balances rose to $623 million at year-end 2013, compared with $530 million at the end of 2012. You trust us to understand your business, including the ups and downs. You trust us to quickly and efficiently get loans closed and meet your specific financing needs. You trust that we will be here for you next year and for many years to come.

On behalf of everyone at Farm Credit West, we thank you for your continued confidence and patronage. We look forward to the opportunity to thank you in person at an upcoming customer appreciation event in your area.

Sincerely,

Mark D. Littlefield President and CEO

Blake Harlan Chairman


It’s Your Money

As owners of the financial cooperative, Farm Credit West’s customers have the opportunity to share in the financial success of the cooperative through patronage distributions. Farm Credit West distributed a record $53 million to our customer-owners for 2013 (34% of net income), making a total of more than $305 million paid since we began the program in 2002.Your Board of Directors decides annually how much of the current year’s earnings should be retained in the cooperative, with the balance to be returned to eligible customers. Some of the key factors in this decision are:

• Regulatory requirements and expectations

• Capital needed to accommodate future growth

• An appropriate level of capital to weather periods of adversity

While each year is a new decision to distribute cash patronage, the Board seeks to maintain consistent distributions in good and bad times to the extent possible.

The ongoing success of this program reflects the strength of Farm Credit West, the unique benefits of our cooperative structure, and our commitment to providing value to your business at every opportunity.

Patronage Distribution (in millions) and Basis Points (BPS)

Patronage Distribution (in millions) and basis points (BPS)

2009 2010 2011 2012 2013

$31

50

$32

50

$33

50BPS BPS BPSBPSBPS

$51

75

$53

75



Our Story

FUNDS

KEY

MEMBER BORROWERS

WHOLESALE BANKS

$

FEDERAL FARM CREDIT NOITAROPROC GNIDNUF SKNAB

DOMESTIC AND INTERNATIONAL INVESTORS

RETAIL ASSOCIATIONS

OWNERSHIP

It’s a simple one. We believe in matching needs to services, in offering competitive rates, in providing the best service possible. To us “The Customer Comes First” is not a cliché; it’s just the way we do business — from branch loan officer to CEO. As part of the nationwide cooperative Farm Credit System, our customers are customer-owners of Farm Credit West. They also happen to be our neighbors and friends, for our roots run deep in the community. Through youth programs, industry support, education, research, and local food programs, we are passionate about nurturing today while planting the seeds of tomorrow. Our future farmers and ranchers deserve every chance for success and we are committed to giving them that, just like we did for their parents, grandparents, even great-grandparents, since our origins in 1916.

Through good times, tough times, and everything in between, we have been here, providing financial services focused exclusively on agriculture, standing with our customers, working for them with honesty, dedication, and personal attention. We’ve been serving agriculture this way for almost 100 years, and we’ll keep doing it this way as long as there is agriculture to serve.

We believe in service.

We believe in you.

We are Farm Credit West.


Front Row: Sureena B. Thiara, Robert N. Hansen, Cornelius (Case) Van Wingerden, Gregory O. (Butch) Dias, Jr., Robert E. Amarel, Jr.,

Craig C. Gnos. Back Row: Joseph C. (Joey) Airoso, Richard J. Enns, Thomas R. Heenan, Blake Harlan, Barry T. Powell, Edgar A. Terry,

Alben F. Barkley, Douglas C. Filipponi. Not Pictured: Adam B. Firestone.

Front Row: Mark D. Littlefield, William M. Noland, Daniel R. Clawson, Christopher J. Doherty. Back Row: John C. Boyes,

Melanie D. Johnson, Ernest M. Hodges, Chris N. Brumfield, Chris R. Roche.

Board of Directors

Executive Management Team

Financial Highlights

One of the financial strengths of Farm Credit West is the diversity of our loan portfolio. While our $6.9 billion asset base is concentrated in loans made to customers in the agricultural and rural sectors of the economy, our loan portfolio is widely diversified by commodity. The accompanying chart illustrates this diversity.

Commodities

Over the past five years, Farm Credit West’s earnings have grown steadily and substantially. The improvement has come primarily through reduced credit losses, higher net interest margins, and modest growth in the loan portfolio. In 2011, our funding bank, U.S. AgBank, merged with CoBank. As part of the merger recapitalization, $47.8 million in non-recurring transactions were recognized in income.

Net Income (in millions)

Net Income (in millions)

2009 2010 2011 2012 2013

$47.8

$129.0

$92.2

non-recurring bank

merger-related income

$105.8 $176.8 $151.5 $156.5

EDIBLE TREENUTS 15%

DAIRY 17%

TREE FRUIT 5%

CITRUS & AVOCADOS 5%

LIVESTOCK 4%

FLOWERS & NURSERY 4%

TABLE GRAPES 3%

RICE 2%

OTHER 6%

FARM-RELATED BUSINESS 5%

FIELD & FEED CROPS 7%

WINE &WINE GRAPES

10%

VEGETABLES 7%

PROCESSING& MARKETING

1 0%


At December 31, 2013

The majority of our assets are long-term mortgages secured by a first lien on real estate. We also purchase loan participations, mostly from other Farm Credit entities, to enhance our commodity and geographic diversity.

Earning Assets (in millions)Average Earning Assets (in millions)

Average earning assets are the engine that powers Farm Credit West’s earnings. These assets grew $332 million, or 5.5%, during 2013 as economic conditions continue to rebound from an investment slowdown following the 2008 – 2009 recession.

Average Earning Assets

2009 2010 2011 2012 2013

$5,576 $5,726 $5,737 $5,991 $6,323

$5,576 $5,726 $5,737 $5,991 $6,323

LONG-TERM MORTGAGES$3,710 (56%)

COMMERCIALOPERATING LOANS

$1,725 (26%)

LOAN PARTICIPATIONS

PURCHASED$833 (13%)

FINANCING LEASES

$147 (2%)

FARMER MACSECURITIES$200 (3%)

Earning assets (in millions)

Nonearning assets represent property acquired through foreclosure and nonaccrual loans. Significant progress has been made in reducing nonearning assets to more manageable levels.

Nonearning Assets (in millions)

Non-earning Assets

2009 2010 2011 2012 2013

$133 $191 $187 $156 $96


At December 31, 2013

Operating Efficiency Ratio

FCW23.4%

All FCS Associations38.0%

U.S. Banks62.0%

Farm Credit West leads the way in operating efficiency. The operating efficiency ratio represents operating expense as a percent of revenue (net interest income + noninterest income). Said another way, an operating efficiency ratio of 25% means it takes 25 cents to generate every dollar of revenue. Farm Credit West’s ratio of 23.4% in 2013 compares very favorably to the average for all Farm Credit associations of 38% or the average for similar-sized U.S. banks of 62%.

Operating Efficiency Ratio

The core surplus ratio is our key regulatory capital measure and indicator of financial strength. It is our capital that protects the association from severe events that may jeopardize future viability. We have continued to build financial strength while at the same time increasing cash patronage distributions to customers.

Core Surplus Ratio

Core Surplus Ratio

2009 2010 2011 2012 2013

10.1% 11.0% 12.5% 13.6% 14.4%


For the year ending December 31, 2013


Five-Year Summary of Selected Financial Data

(dollars in thousands) 2013 2012 2011 2010 2009

At December 31:Consolidated Balance Sheet Data Loans and leases 6,414,566$ 6,078,186$ 5,655,766$ 5,484,059$ 5,347,217$ Less: allowance for loan losses (34,700) (33,200) (29,600) (24,200) (21,000) Net loans and leases 6,379,866 6,044,986 5,626,166 5,459,859 5,326,217 Investment securities 200,188 230,926 271,556 315,118 364,433 Investment in CoBank/AgBank 209,447 208,005 205,888 169,936 168,089 Other property owned 9,634 28,974 64,140 82,827 48,777 Other assets 126,796 155,622 114,910 102,227 120,471 Total assets 6,925,931$ 6,668,513$ 6,282,660$ 6,129,967$ 6,027,987$

Obligations with maturities of one year or less 5,540,184$ 5,453,720$ 5,162,583$ 5,166,299$ 5,179,169$ Obligations with maturities longer than one year 5,844 6,091 5,658 6,433 6,057 Total liabilities 5,546,028 5,459,811 5,168,241 5,172,732 5,185,226

Preferred stock 271,438 198,336 198,336 180,509 134,660 Capital stock and participation certificates 3,978 3,847 3,816 3,868 3,876 Unallocated retained earnings 1,101,448 1,002,456 905,955 766,850 697,429 Accumulated other comprehensive income 3,039 4,063 6,312 6,008 6,796 Total members’ equity 1,379,903 1,208,702 1,114,419 957,235 842,761 Total liabilities and members’ equity 6,925,931$ 6,668,513$ 6,282,660$ 6,129,967$ 6,027,987$

For the year ended December 31:Consolidated Statement of Income Data Net interest income 178,951$ 166,274$ 160,349$ 146,555$ 137,397$ Provision for loan losses (12,406) (16,046) (22,975) (23,049) (21,945) Noninterest (expense) income, net (9,962) 1,378 38,797 (17,769) (24,083) (Provision for) benefit from income taxes (129) (134) 678 81 819 Net income 156,454$ 151,472$ 176,849$ 105,818$ 92,188$ Comprehensive income 155,430$ 149,223$ 177,153$ 105,030$ 87,332$

Consolidated Key Financial RatiosFor the year ended December 31: Return on average assets 2.36% 2.40% 2.92% 1.75% 1.58% Return on average members’ equity 11.91% 12.71% 16.80% 11.23% 11.09% Net interest income as a % of average earning assets 2.83% 2.78% 2.80% 2.56% 2.46% Net charge-offs as a % of average loans 0.18% 0.22% 0.32% 0.37% 0.20%At December 31: Members’ equity as a % of total assets 19.92% 18.13% 17.74% 15.62% 13.98% Ratio of debt to members’ equity 4.0 to 1 4.5 to 1 4.6 to 1 5.4 to 1 6.2 to 1 Allowance for loan losses as a % of loans 0.54% 0.55% 0.52% 0.44% 0.39% Permanent capital ratio 18.62% 16.99% 16.12% 14.27% 12.53% Total surplus ratio 14.46% 13.70% 12.62% 11.02% 10.05% Core surplus ratio 14.35% 13.56% 12.47% 10.98% 10.05%

Other Patronage distribution declared 53,000$ 51,000$ 33,000$ 32,000$ 31,000$ Preferred stock dividends declared and paid 4,462$ 3,971$ 4,744$ 4,397$ 3,317$ Loans serviced for others 1,447,079$ 1,267,858$ 1,264,329$ 1,217,260$ 1,232,391$


Management’s Discussion and Analysis

Introduction The following discussion summarizes the financial position and results of operations of Farm Credit West, ACA and its subsidiaries Farm Credit West, FLCA and Farm Credit West, PCA (collectively, Farm Credit West) for the year ended December 31, 2013. Comparisons to prior years are included. We have emphasized material known trends, commitments, events, or uncertainties that are reasonably likely to impact our financial condition and results of operations. You should read these comments along with the consolidated financial statements, footnotes, and other sections of this report. The accompanying consolidated financial statements were prepared under the oversight of our Audit Committee.

Our annual and quarterly reports to shareholders are available on our website, www.farmcreditwest.com, or can be obtained free of charge by calling our corporate headquarters at 916-780-1166, or by writing to Farm Credit West, 1478 Stone Point Drive, Suite 450, Roseville, CA 95661. Annual reports are mailed to all stockholders within 90 days after year-end and are available on our website within 75 days after year-end; quarterly reports are available on our website within 40 days after each calendar quarter-end. The 2014 quarterly reports to shareholders will be available on approximately May 9, 2014, August 8, 2014, and November 7, 2014.

Business Overview Farm Credit System Structure and Mission

We are one of 82 associations in the Farm Credit System (System), which was created by Congress in 1916 and has served agricultural producers for more than 97 years. The System’s mission is to provide sound and dependable credit to American farmers, ranchers, and producers or harvesters of aquatic products, and farm-related businesses through a member-owned cooperative system. This is done by making loans and providing financial services to creditworthy individuals and businesses. Through its commitment and dedication to agriculture, the System continues to have the largest portfolio of agricultural loans of any lender in the United States. As the System’s independent safety and soundness federal regulator, the Farm Credit Administration (FCA) supervises, examines, and regulates System institutions.

Our Structure

As a cooperative, we are owned by the members we serve. We emphasize our cooperative structure by providing superior service at competitive rates and then, when circumstances allow, paying significant cash patronage. Patronage of $53 million was declared in 2013 and will be distributed to customers in 2014 – about 0.75% of their average 2013 borrowings.

Our chartered territory covers a diverse area in parts of California and Nevada, though it is primarily concentrated in the southern San Joaquin Valley, Central Coast and Sacramento Valley. Note 1 to the financial statements includes a more detailed description of our chartered territory.

We make production and intermediate-term loans for agricultural production or operating purposes, financing leases and long-term real estate mortgage loans to farmers, ranchers, rural residents, and agribusinesses. Additionally, we provide other related services to our borrowers. Our success begins with our extensive agricultural experience and market knowledge; satisfying our customers is of paramount importance.

The primary funding source for our lending and operations is our direct note from CoBank, ACB (CoBank). CoBank is a cooperative of which we are an owner and member. Prior to its merger with CoBank on January 1, 2012, U.S. AgBank, FCB (AgBank) was our funding bank. Effective January 1, 2012, AgBank merged with and into CoBank, FCB, a wholly owned subsidiary of CoBank, ACB. As a result of the merger, our investment in AgBank stock was converted to CoBank stock. The financial condition and results of operations of CoBank materially affect the risk associated with shareholder investments in Farm Credit West. Shareholders of Farm Credit West may obtain copies of CoBank’s financial statements free of charge by calling 916-780-1166 or by writing to Farm Credit West, 1478 Stone Point Drive, Suite 450, Roseville, CA 95661, or by accessing CoBank’s website at www.cobank.com.

We purchase technology and other operational services from Financial Partners, Inc. (FPI), which is a technology service corporation. We are a shareholder in FPI along with other FPI customers. In addition, we purchase payroll and other human resource services from Farm Credit Foundations, a human resources service provider which serves a number of System entities.

Fulfillment of Our Public Policy Purpose/Mission

A healthy America requires a strong agricultural economy. Congress enacted the Farm Credit Act to help ensure an effective credit delivery system dedicated to financing rural America that will further the public interest. We strive to ensure our mission statement is met through operational strategies which focus on public policy fulfillment, customer service, maintaining a fiscally sound organization, and attracting, developing, and retaining high quality directors and staff.

For public policy fulfillment, our operational strategies focus on being a responsible organization meeting our chartered purpose of legally and ethically serving the needs of rural America.


For customer service, our operational strategies focus on

providing superior value-added service to all eligible customers within our chartered territory, with emphasis on outreach to young, beginning, small, and minority agricultural producers (as discussed in the Young, Beginning, and Small Farmer and Rancher Program section of this report). We are dedicated to being responsive to the needs of customers and potential customers as well as to meeting market forces.

For maintaining a fiscally sound organization, our operational strategies focus on using resources efficiently to build a safe and sound organization that is positioned to consistently provide “superior customer service at competitive interest rates.”

For human resource strategies, we emphasize the need to attract, develop, and retain the people required to ensure success in meeting our public policy purpose and mission, serving customers, and maintaining fiscal stability. We are striving to develop diverse human resources.

As more fully detailed throughout this Annual Report, our performance is consistent with our public policy responsibilities. Results achieved are reflective of consistent progress.

Governance Board of Directors Oversight and Independence

We are governed by a 15-member Board of Directors (Board) that oversees the management of our Association. Of these directors, 13 are elected by the stockholders and two are appointed by the elected directors.

The Board maintains four committees: a Corporate Governance Committee, a Human Capital and Compensation/ Evaluation Committee, an Enterprise Risk Management Committee, and an Audit Committee. These committees are discussed in greater detail in the Disclosure Information Required by FCA Regulations section of this Annual Report. The Board and the four Board committees meet regularly to oversee and discuss our strategic plans, operating plans and performance, financial reporting, legal and regulatory compliance, chief executive officer compensation and evaluation, issues faced, and risks managed.

The Board has adopted a Charter and a Code of Ethics to support their leadership and oversight roles in the accomplishment of our mission. In their Code of Ethics, the Board, and each director, commits to conduct business in accordance with the highest ethical standards.

All directors must exercise sound judgment in deciding matters in our interest. All our directors are independent from the perspective that none of our management or staff serve as Board members. However, we are a financial

service cooperative, and the Farm Credit Act and FCA Regulations require our elected directors to have a loan relationship with us.

The elected directors, as borrowers, have a vested interest in ensuring our Association remains strong and successful. However, our borrowing relationship could be viewed as having the potential to compromise the independence of an elected director. For this reason, the Board has established independence criteria to ensure that a loan relationship does not compromise the independence of our Board. In accordance with our Board of Directors’ Charter, annually, in conjunction with our independence analysis and reporting on our loans to directors, each director provides financial information and any other documentation or assertions needed for the Board to determine the independence of each director (as defined in the Charter). Following the most recent analysis of established criteria, the Board determined that each of our directors met the independence criteria.

Governance and Financial Reporting Control

The Board has monitored the requirements of public companies under the Sarbanes-Oxley Act. While we are not subject to the requirements of that Act, we have implemented the following steps to strengthen governance and financial reporting: (1) a system for the receipt and treatment of anonymous “whistleblower” complaints; (2) a code of ethics for our directors; (3) open lines of communication between the independent auditors, the Board’s Audit Committee, and management; (4) this “plain English” annual report to stockholders; (5) officer certification of accuracy and completeness of the financial statements; and, (6) information disclosure through our website.

Loan Portfolio Loan, Lease, and Investment Security Volume

We offer production, intermediate-term, and long-term loan products to stockholders/borrowers for qualified agricultural purposes within our chartered territory. Current product options include variable and fixed interest rates. Loans are also made for rural homes, farm-related businesses, and agricultural processing and marketing operations. Our portfolio also contains leases and purchased loans (participations purchased). Our loan and lease volume outstanding was $6.4 billion at December 31, 2013 compared with $6.1 billion at December 31, 2012, a 6% increase. At year-end 2011, loan and lease volume of $5.7 billion was outstanding.

In 2003 and 2006, we exchanged mortgage loans for Federal Agricultural Mortgage Corporation (Farmer Mac) guaranteed mortgage-backed securities, which impacted our volume of loans and leases. We continue to service the loans included in those transactions. These investments in guaranteed securities are included in this report’s Consolidated Balance



Introduction The following discussion summarizes the financial position and results of operations of Farm Credit West, ACA and its subsidiaries Farm Credit West, FLCA and Farm Credit West, PCA (collectively, Farm Credit West) for the year ended December 31, 2013. Comparisons to prior years are included. We have emphasized material known trends, commitments, events, or uncertainties that are reasonably likely to impact our financial condition and results of operations. You should read these comments along with the consolidated financial statements, footnotes, and other sections of this report. The accompanying consolidated financial statements were prepared under the oversight of our Audit Committee.

Our annual and quarterly reports to shareholders are available on our website, www.farmcreditwest.com, or can be obtained free of charge by calling our corporate headquarters at 916-780-1166, or by writing to Farm Credit West, 1478 Stone Point Drive, Suite 450, Roseville, CA 95661. Annual reports are mailed to all stockholders within 90 days after year-end and are available on our website within 75 days after year-end; quarterly reports are available on our website within 40 days after each calendar quarter-end. The 2014 quarterly reports to shareholders will be available on approximately May 9, 2014, August 8, 2014, and November 7, 2014.

Business Overview Farm Credit System Structure and Mission

We are one of 82 associations in the Farm Credit System (System), which was created by Congress in 1916 and has served agricultural producers for more than 97 years. The System’s mission is to provide sound and dependable credit to American farmers, ranchers, and producers or harvesters of aquatic products, and farm-related businesses through a member-owned cooperative system. This is done by making loans and providing financial services to creditworthy individuals and businesses. Through its commitment and dedication to agriculture, the System continues to have the largest portfolio of agricultural loans of any lender in the United States. As the System’s independent safety and soundness federal regulator, the Farm Credit Administration (FCA) supervises, examines, and regulates System institutions.

Our Structure

As a cooperative, we are owned by the members we serve. We emphasize our cooperative structure by providing superior service at competitive rates and then, when circumstances allow, paying significant cash patronage. Patronage of $53 million was declared in 2013 and will be distributed to customers in 2014 – about 0.75% of their average 2013 borrowings.

Our chartered territory covers a diverse area in parts of California and Nevada, though it is primarily concentrated in the southern San Joaquin Valley, Central Coast and Sacramento Valley. Note 1 to the financial statements includes a more detailed description of our chartered territory.

We make production and intermediate-term loans for agricultural production or operating purposes, financing leases and long-term real estate mortgage loans to farmers, ranchers, rural residents, and agribusinesses. Additionally, we provide other related services to our borrowers. Our success begins with our extensive agricultural experience and market knowledge; satisfying our customers is of paramount importance.

The primary funding source for our lending and operations is our direct note from CoBank, ACB (CoBank). CoBank is a cooperative of which we are an owner and member. Prior to its merger with CoBank on January 1, 2012, U.S. AgBank, FCB (AgBank) was our funding bank. Effective January 1, 2012, AgBank merged with and into CoBank, FCB, a wholly owned subsidiary of CoBank, ACB. As a result of the merger, our investment in AgBank stock was converted to CoBank stock. The financial condition and results of operations of CoBank materially affect the risk associated with shareholder investments in Farm Credit West. Shareholders of Farm Credit West may obtain copies of CoBank’s financial statements free of charge by calling 916-780-1166 or by writing to Farm Credit West, 1478 Stone Point Drive, Suite 450, Roseville, CA 95661, or by accessing CoBank’s website at www.cobank.com.

We purchase technology and other operational services from Financial Partners, Inc. (FPI), which is a technology service corporation. We are a shareholder in FPI along with other FPI customers. In addition, we purchase payroll and other human resource services from Farm Credit Foundations, a human resources service provider which serves a number of System entities.

Fulfillment of Our Public Policy Purpose/Mission

A healthy America requires a strong agricultural economy. Congress enacted the Farm Credit Act to help ensure an effective credit delivery system dedicated to financing rural America that will further the public interest. We strive to ensure our mission statement is met through operational strategies which focus on public policy fulfillment, customer service, maintaining a fiscally sound organization, and attracting, developing, and retaining high quality directors and staff.

For public policy fulfillment, our operational strategies focus on being a responsible organization meeting our chartered purpose of legally and ethically serving the needs of rural America.


For customer service, our operational strategies focus on

providing superior value-added service to all eligible customers within our chartered territory, with emphasis on outreach to young, beginning, small, and minority agricultural producers (as discussed in the Young, Beginning, and Small Farmer and Rancher Program section of this report). We are dedicated to being responsive to the needs of customers and potential customers as well as to meeting market forces.

For maintaining a fiscally sound organization, our operational strategies focus on using resources efficiently to build a safe and sound organization that is positioned to consistently provide “superior customer service at competitive interest rates.”

For human resource strategies, we emphasize the need to attract, develop, and retain the people required to ensure success in meeting our public policy purpose and mission, serving customers, and maintaining fiscal stability. We are striving to develop diverse human resources.

As more fully detailed throughout this Annual Report, our performance is consistent with our public policy responsibilities. Results achieved are reflective of consistent progress.

Governance Board of Directors Oversight and Independence

We are governed by a 15-member Board of Directors (Board) that oversees the management of our Association. Of these directors, 13 are elected by the stockholders and two are appointed by the elected directors.

The Board maintains four committees: a Corporate Governance Committee, a Human Capital and Compensation/ Evaluation Committee, an Enterprise Risk Management Committee, and an Audit Committee. These committees are discussed in greater detail in the Disclosure Information Required by FCA Regulations section of this Annual Report. The Board and the four Board committees meet regularly to oversee and discuss our strategic plans, operating plans and performance, financial reporting, legal and regulatory compliance, chief executive officer compensation and evaluation, issues faced, and risks managed.

The Board has adopted a Charter and a Code of Ethics to support their leadership and oversight roles in the accomplishment of our mission. In their Code of Ethics, the Board, and each director, commits to conduct business in accordance with the highest ethical standards.

All directors must exercise sound judgment in deciding matters in our interest. All our directors are independent from the perspective that none of our management or staff serve as Board members. However, we are a financial

service cooperative, and the Farm Credit Act and FCA Regulations require our elected directors to have a loan relationship with us.

The elected directors, as borrowers, have a vested interest in ensuring our Association remains strong and successful. However, our borrowing relationship could be viewed as having the potential to compromise the independence of an elected director. For this reason, the Board has established independence criteria to ensure that a loan relationship does not compromise the independence of our Board. In accordance with our Board of Directors’ Charter, annually, in conjunction with our independence analysis and reporting on our loans to directors, each director provides financial information and any other documentation or assertions needed for the Board to determine the independence of each director (as defined in the Charter). Following the most recent analysis of established criteria, the Board determined that each of our directors met the independence criteria.

Governance and Financial Reporting Control

The Board has monitored the requirements of public companies under the Sarbanes-Oxley Act. While we are not subject to the requirements of that Act, we have implemented the following steps to strengthen governance and financial reporting: (1) a system for the receipt and treatment of anonymous “whistleblower” complaints; (2) a code of ethics for our directors; (3) open lines of communication between the independent auditors, the Board’s Audit Committee, and management; (4) this “plain English” annual report to stockholders; (5) officer certification of accuracy and completeness of the financial statements; and, (6) information disclosure through our website.

Loan Portfolio Loan, Lease, and Investment Security Volume

We offer production, intermediate-term, and long-term loan products to stockholders/borrowers for qualified agricultural purposes within our chartered territory. Current product options include variable and fixed interest rates. Loans are also made for rural homes, farm-related businesses, and agricultural processing and marketing operations. Our portfolio also contains leases and purchased loans (participations purchased). Our loan and lease volume outstanding was $6.4 billion at December 31, 2013 compared with $6.1 billion at December 31, 2012, a 6% increase. At year-end 2011, loan and lease volume of $5.7 billion was outstanding.

In 2003 and 2006, we exchanged mortgage loans for Federal Agricultural Mortgage Corporation (Farmer Mac) guaranteed mortgage-backed securities, which impacted our volume of loans and leases. We continue to service the loans included in those transactions. These investments in guaranteed securities are included in this report’s Consolidated Balance



Sheet as either investment securities – available-for-sale or investment securities – held-to-maturity. On three occasions, we have sold portions of those investment securities to AgBank (now CoBank) to reduce the amount of securities held.

We have consistently been successful in marketing and competitively pricing loan products to those agricultural producers who generate significant economic activity in our chartered territory. The $6.6 billion combined volume of loans and securities at December 31, 2013 was a 5% increase over year-end 2012. The $6.3 billion combined volume of loans and securities outstanding at December 31, 2012 was a 6% increase over the December 31, 2011 volume of $5.9 billion. Loan volume growth in 2012 and 2013 is consistent with sustainable growth targets in our business plan.

The types of loans outstanding at December 31 are reflected in the following table.

December 31, 2013 2012 2011

Real estate mortgage loans 56.5% 58.0% 57.6%Production and intermediate-term loans 22.0% 22.4% 24.8%Agribusiness loans: Processing and marketing 10.3% 10.3% 10.7% Farm related businesses 5.0% 4.3% 3.8% Loans to cooperatives 1.7% 1.4% 1.1%Direct financing leases 2.3% 2.0% 1.7%Communication loans 1.3% 1.2% 0.3%Energy loans 0.9% 0.4% 0.0%

Total 100.0% 100.0% 100.0%

Percentage of Principal Outstanding

Long-term farm mortgages generally finance the purchase of farm real estate, refinance existing mortgages, help construct various facilities used in agricultural operations, and help purchase other rural residential real estate for both full-time and part-time farmers. Production and intermediate-term loans are generally made for operating funds, equipment financing, and other purposes. Agribusiness loans are comprised of loans to processors and marketers, farm-related businesses, and cooperatives.

Portfolio Diversification While we make loans and provide financially-related services to qualified customers in agricultural and rural sectors and to certain related entities, our loan portfolio is diversified by commodity, geographic locations, and participations purchased and sold, as illustrated in the following tables.

Farm Credit West’s outstanding loan volume percentage by commodity segment is shown in the following table. The table reflects a loan portfolio that is diversified among major commodities or types of agriculture. Repayment ability of our customers is closely related to the production and the

profitability of the commodities they raise. If a loan fails to perform, restructuring or other servicing alternatives are influenced by the underlying value of the collateral which is impacted by industry economics. While management is committed to maintaining sound credit quality, future performance would be negatively impacted by adverse agricultural conditions. The degree of the adverse impact would be correlated with the specific commodities impacted and the magnitude and duration of the impact.

December 31, 2013 2012 2011

Dairy 17.1% 18.9% 19.3%Edible tree nuts 15.4% 14.4% 13.4%Wine grapes/wine 10.3% 10.0% 10.2%Processing and marketing 10.3% 10.3% 10.7%Vegetables 7.0% 7.2% 7.4%Field/feed crops 6.6% 6.4% 6.8%Farm related business 5.0% 4.3% 3.8%Tree fruit 4.9% 4.7% 4.8%Citrus/avocados 4.5% 4.5% 4.4%Livestock 4.0% 4.9% 5.3%Flowers/nursery 3.5% 3.6% 3.8%Table grapes 3.1% 3.1% 3.3%Rice 2.3% 2.5% 2.4%Other 6.0% 5.2% 4.4%

Total 100.0% 100.0% 100.0%


The geographic distribution of loans by county is illustrated in the following table.

December 31, 2013 2012 2011

Tulare 27.8% 26.3% 24.9%Kern 10.4% 11.9% 12.3%Santa Barbara 7.3% 7.2% 7.2%San Luis Obispo 6.6% 6.6% 7.3%Ventura 6.2% 6.5% 6.4%Sutter 5.3% 5.0% 4.6%Kings 5.3% 5.4% 5.4%Los Angeles 3.2% 2.9% 2.9%Yolo 2.3% 2.4% 2.5%Butte 1.7% 1.7% 1.6%Sacramento 1.2% 1.3% 1.4%Yuba 0.9% 0.9% 0.9%Solano 0.8% 0.7% 0.9%Placer 0.5% 0.5% 0.6%Other 20.5% 20.7% 21.1%

Total 100.0% 100.0% 100.0%


Economic Overview

After more than a year of delays, a new Farm Bill was signed into law by the President in February 2014. The bill provides for some significant changes in farm policy. As was expected, the new bill immediately eliminates the Direct


Payments program that has been in place for many years. In its place is an expanded crop insurance program, and includes adjustments to payment limitations, eligibility rules and means testing for program participation. The bill also overhauls dairy policy, including the new Dairy Producer Margin Protection Program, and adds a new area-wide, group-risk crop insurance policy for cotton producers. Overall, lawmakers sought to make sweeping improvements to crop insurance programs that would better serve all producers.

Land values in the traditional “Farm Belt” have been strengthening for the last three years, generally in synch with commodity prices. Land price volatility is likely in the future until stability returns to the commodity markets and until unemployment is reduced and the economy improves. Given signs of increased corn and grain supplies in 2014, and the resulting decline in the average corn price, a correction in farm land values is possible in 2014.

Agriculture in the area served by Farm Credit West is generally less susceptible to land value declines than most areas of the U.S. because of the diversity in commodities produced and the relatively low level of dependence on government support programs (other than cotton and rice). Land values in some portions of the territory are influenced by the proximity to the ocean on the west and to the Los Angeles metropolitan area on the south. While urban growth in the Sacramento and San Joaquin Valleys has caused upward pressure on urban fringe property values for decades,that trend stopped in 2008. Those properties declined from 2009 through 2011 and have only recently reached a stable level. Most of FCW’s territory is seeing strengthening in land values being driven by currently high Almond, Pistachio and Walnut prices. In fact, a considerable amount of land formerly committed to feed and silage production is being converted into orchards, with land values for plantable land reaching record levels in California.

Dairy operations experienced significant declines in liquidity and equity during the last five years due to significant volatility in export demand, feed prices and milk prices. The California dairy industry experienced the most recent downturn in 2012 with milk price falling below cost of production for the majority of the year for most dairy operators, further straining their equity. The situation was compounded by the drought in the Mid-West, which increased the price of grain by 150% and also pulled up the value of local forages such as silage and hay. High feed prices carried into 2013, so many operations were at or below breakeven, which has caused further depletion of equity and financial stress in the industry. With so many operations coming into 2012 with limited equity, the downturn caused more operations to liquidate or to file for bankruptcy. In addition, the ongoing financial stress has also negatively impacted the value of dairy facilities in California with values dropping significantly from the peak in 2008 and 2009.

The economic outlook for the California dairy industry going into 2014 is optimistic, with corn prices significantly lower. Local forage prices are at historic highs, and are expected toremain high in 2014 due to availability. Improved margins with milk over feed cost are projected in early 2014. Dairy profits will continue to be heavily reliant on foreign demand and the dairy industry’s ability to effectively manage domestic production levels. The market for dairy facilities is expected to remain soft in 2014.

The 2013 almond crop estimate by the National Agricultural Statistics Service of 1.85 billion pounds is expected to be met. In general, the kernel size was the smallest in history, though the quality of the nuts is considered excellent. Almond prices continue to remain strong with an increase in demand. Blended grower prices for 2013 are expected to be above $3.00 per pound. Some concerns are being noted with regards to the 2014 yields as water availability will affect production in certain areas within the San Joaquin Valley.

The 2013 pistachio crop is expected to be between 480 –485 million pounds, down about 13% from original estimates. The shorter crop is said to be the result of erratic temperature changes causing a high percentage of blanks. The combination of 2012 carryover and 2013 crop will result in a total marketable crop that is similar in size to the 2012 year. Demand and shipments continue to rise, thus anticipated prices will stay strong with grower prices expected above $3.00 per pound. Final grower prices for the 2012 crop were $2.85 - $2.90 per pound. The 2014 crop year is expected to be an “on year”, although water availability continues to be of concern potentially impacting future production.

California walnut production is now forecast by the California Agricultural Statistical Service at 495,000 tons for 2013, comparable to the 2012 and 2011 crop. Growing and harvest conditions in 2013 were favorable. With fewer Chinese walnuts on the market this year, demand is exceeding supply which could result in growers earning above average returns. California walnut acreage continues to increase, with 2013 bearing acreage up 4.1% over 2012. Small carry forwards are expected for the next year, along with continued strong global and domestic demand.

The 2013 California wine grape harvest was considered “above average” in both production and quality, making it the second consecutive year at that level. Prior to that successiveshort crop years left the bulk wine supply at the lowest levels in 10+ years. The two years of bountiful harvests created a softening in the bulk wine market. Grape growers are expected to reflect profitability throughout the state. The grower sector that has been actively planting vineyards will likely shrink due to the possible higher bulk supplies and water issues, particularly in the Paso Robles area where a two-year moratorium on new water use has been implemented. The current conditions will likely result in a leveling of supply growth through fewer new vineyard plantings.



Sheet as either investment securities – available-for-sale or investment securities – held-to-maturity. On three occasions, we have sold portions of those investment securities to AgBank (now CoBank) to reduce the amount of securities held.

We have consistently been successful in marketing and competitively pricing loan products to those agricultural producers who generate significant economic activity in our chartered territory. The $6.6 billion combined volume of loans and securities at December 31, 2013 was a 5% increase over year-end 2012. The $6.3 billion combined volume of loans and securities outstanding at December 31, 2012 was a 6% increase over the December 31, 2011 volume of $5.9 billion. Loan volume growth in 2012 and 2013 is consistent with sustainable growth targets in our business plan.

The types of loans outstanding at December 31 are reflected in the following table.

December 31, 2013 2012 2011

Real estate mortgage loans 56.5% 58.0% 57.6%Production and intermediate-term loans 22.0% 22.4% 24.8%Agribusiness loans: Processing and marketing 10.3% 10.3% 10.7% Farm related businesses 5.0% 4.3% 3.8% Loans to cooperatives 1.7% 1.4% 1.1%Direct financing leases 2.3% 2.0% 1.7%Communication loans 1.3% 1.2% 0.3%Energy loans 0.9% 0.4% 0.0%

Total 100.0% 100.0% 100.0%


Long-term farm mortgages generally finance the purchase of farm real estate, refinance existing mortgages, help construct various facilities used in agricultural operations, and help purchase other rural residential real estate for both full-time and part-time farmers. Production and intermediate-term loans are generally made for operating funds, equipment financing, and other purposes. Agribusiness loans are comprised of loans to processors and marketers, farm-related businesses, and cooperatives.

Portfolio Diversification While we make loans and provide financially-related services to qualified customers in agricultural and rural sectors and to certain related entities, our loan portfolio is diversified by commodity, geographic locations, and participations purchased and sold, as illustrated in the following tables.

Farm Credit West’s outstanding loan volume percentage by commodity segment is shown in the following table. The table reflects a loan portfolio that is diversified among major commodities or types of agriculture. Repayment ability of our customers is closely related to the production and the

profitability of the commodities they raise. If a loan fails to perform, restructuring or other servicing alternatives are influenced by the underlying value of the collateral which is impacted by industry economics. While management is committed to maintaining sound credit quality, future performance would be negatively impacted by adverse agricultural conditions. The degree of the adverse impact would be correlated with the specific commodities impacted and the magnitude and duration of the impact.

December 31, 2013 2012 2011

Dairy 17.1% 18.9% 19.3%Edible tree nuts 15.4% 14.4% 13.4%Wine grapes/wine 10.3% 10.0% 10.2%Processing and marketing 10.3% 10.3% 10.7%Vegetables 7.0% 7.2% 7.4%Field/feed crops 6.6% 6.4% 6.8%Farm related business 5.0% 4.3% 3.8%Tree fruit 4.9% 4.7% 4.8%Citrus/avocados 4.5% 4.5% 4.4%Livestock 4.0% 4.9% 5.3%Flowers/nursery 3.5% 3.6% 3.8%Table grapes 3.1% 3.1% 3.3%Rice 2.3% 2.5% 2.4%Other 6.0% 5.2% 4.4%

Total 100.0% 100.0% 100.0%


The geographic distribution of loans by county is illustrated in the following table.

December 31, 2013 2012 2011

Tulare 27.8% 26.3% 24.9%Kern 10.4% 11.9% 12.3%Santa Barbara 7.3% 7.2% 7.2%San Luis Obispo 6.6% 6.6% 7.3%Ventura 6.2% 6.5% 6.4%Sutter 5.3% 5.0% 4.6%Kings 5.3% 5.4% 5.4%Los Angeles 3.2% 2.9% 2.9%Yolo 2.3% 2.4% 2.5%Butte 1.7% 1.7% 1.6%Sacramento 1.2% 1.3% 1.4%Yuba 0.9% 0.9% 0.9%Solano 0.8% 0.7% 0.9%Placer 0.5% 0.5% 0.6%Other 20.5% 20.7% 21.1%

Total 100.0% 100.0% 100.0%


Economic Overview

After more than a year of delays, a new Farm Bill was signed into law by the President in February 2014. The bill provides for some significant changes in farm policy. As was expected, the new bill immediately eliminates the Direct


Payments program that has been in place for many years. In its place is an expanded crop insurance program, and includes adjustments to payment limitations, eligibility rules and means testing for program participation. The bill also overhauls dairy policy, including the new Dairy Producer Margin Protection Program, and adds a new area-wide, group-risk crop insurance policy for cotton producers. Overall, lawmakers sought to make sweeping improvements to crop insurance programs that would better serve all producers.

Land values in the traditional “Farm Belt” have been strengthening for the last three years, generally in synch with commodity prices. Land price volatility is likely in the future until stability returns to the commodity markets and until unemployment is reduced and the economy improves. Given signs of increased corn and grain supplies in 2014, and the resulting decline in the average corn price, a correction in farm land values is possible in 2014.

Agriculture in the area served by Farm Credit West is generally less susceptible to land value declines than most areas of the U.S. because of the diversity in commodities produced and the relatively low level of dependence on government support programs (other than cotton and rice). Land values in some portions of the territory are influenced by the proximity to the ocean on the west and to the Los Angeles metropolitan area on the south. While urban growth in the Sacramento and San Joaquin Valleys has caused upward pressure on urban fringe property values for decades,that trend stopped in 2008. Those properties declined from 2009 through 2011 and have only recently reached a stable level. Most of FCW’s territory is seeing strengthening in land values being driven by currently high Almond, Pistachio and Walnut prices. In fact, a considerable amount of land formerly committed to feed and silage production is being converted into orchards, with land values for plantable land reaching record levels in California.

Dairy operations experienced significant declines in liquidity and equity during the last five years due to significant volatility in export demand, feed prices and milk prices. The California dairy industry experienced the most recent downturn in 2012 with milk price falling below cost of production for the majority of the year for most dairy operators, further straining their equity. The situation was compounded by the drought in the Mid-West, which increased the price of grain by 150% and also pulled up the value of local forages such as silage and hay. High feed prices carried into 2013, so many operations were at or below breakeven, which has caused further depletion of equity and financial stress in the industry. With so many operations coming into 2012 with limited equity, the downturn caused more operations to liquidate or to file for bankruptcy. In addition, the ongoing financial stress has also negatively impacted the value of dairy facilities in California with values dropping significantly from the peak in 2008 and 2009.

The economic outlook for the California dairy industry going into 2014 is optimistic, with corn prices significantly lower. Local forage prices are at historic highs, and are expected toremain high in 2014 due to availability. Improved margins with milk over feed cost are projected in early 2014. Dairy profits will continue to be heavily reliant on foreign demand and the dairy industry’s ability to effectively manage domestic production levels. The market for dairy facilities is expected to remain soft in 2014.

The 2013 almond crop estimate by the National Agricultural Statistics Service of 1.85 billion pounds is expected to be met. In general, the kernel size was the smallest in history, though the quality of the nuts is considered excellent. Almond prices continue to remain strong with an increase in demand. Blended grower prices for 2013 are expected to be above $3.00 per pound. Some concerns are being noted with regards to the 2014 yields as water availability will affect production in certain areas within the San Joaquin Valley.

The 2013 pistachio crop is expected to be between 480 –485 million pounds, down about 13% from original estimates. The shorter crop is said to be the result of erratic temperature changes causing a high percentage of blanks. The combination of 2012 carryover and 2013 crop will result in a total marketable crop that is similar in size to the 2012 year. Demand and shipments continue to rise, thus anticipated prices will stay strong with grower prices expected above $3.00 per pound. Final grower prices for the 2012 crop were $2.85 - $2.90 per pound. The 2014 crop year is expected to be an “on year”, although water availability continues to be of concern potentially impacting future production.

California walnut production is now forecast by the California Agricultural Statistical Service at 495,000 tons for 2013, comparable to the 2012 and 2011 crop. Growing and harvest conditions in 2013 were favorable. With fewer Chinese walnuts on the market this year, demand is exceeding supply which could result in growers earning above average returns. California walnut acreage continues to increase, with 2013 bearing acreage up 4.1% over 2012. Small carry forwards are expected for the next year, along with continued strong global and domestic demand.

The 2013 California wine grape harvest was considered “above average” in both production and quality, making it the second consecutive year at that level. Prior to that successiveshort crop years left the bulk wine supply at the lowest levels in 10+ years. The two years of bountiful harvests created a softening in the bulk wine market. Grape growers are expected to reflect profitability throughout the state. The grower sector that has been actively planting vineyards will likely shrink due to the possible higher bulk supplies and water issues, particularly in the Paso Robles area where a two-year moratorium on new water use has been implemented. The current conditions will likely result in a leveling of supply growth through fewer new vineyard plantings.



Coming off a record crop of 102 million boxes in 2012, the California table grape season is expecting another record crop around 106 million boxes. Prices have tracked very close to last season’s all time high pricing levels; however the pronounced price spike at the end of the California season in 2012 (high $30’s to $40’s) is not expected to repeat, with prices more in the mid to high twenties, which is still very good pricing. Demand has been excellent for most varieties in spite of a large apple and citrus crop. Export sales prices still command a $2-$3 premium over domestic sales prices; however, Red Globes demand is decreasing due to increasing domestic production in China.

The cow/calf sector has experienced a high level of stress on production due to the drought conditions in 2013, with worsening conditions expected for 2014. Many producers that don't have access to irrigated summer pastures have had to sell most if not all of their cow herd. With hay prices running from $250-$300/ton, feeding hay through the summer and fall was not a viable option. Fortunately, cow prices remained strong and many producers have paid loans down or off from the sale of their cow herd. This leaves them the option to purchase bred cows or heifers once feed conditions improve. Fat cattle and feeder cattle prices are athistorically high prices. Declining fed cattle numbers and improved export demand look to push fed cattle prices higher going into 2014. Exports have been increasing, which assists packer profitability and provides price support back through feedlots.

Diversified vegetable farmers largely experienced favorable results in 2013. Labor management has been an issue resulting in higher input and harvest costs. Consumer trends continue to support growth in processed/bagged/prepared vegetables. Water shortages in some Central Valley locations have shifted more product demand to coastal regions which has opened up steady and positive pricing windows. Growers are also experiencing increased demands for organic products, although the price differential from conventionally grown vegetables is nominal. Increased strawberry land demands have created expensive rents for vegetable farmers and in some cases shortages of economic land compatible for vegetable production. The outlook remains positive, but still volatile, for vegetable producers due to high input costs, increasing labor shortages and occasional low commodity prices.

Strawberry production and price trends were generally negative for the 2012/2013 season. This was caused by high volume of strawberry production from Florida and Mexico overlapping the Southern California production window, causing serious oversupply issues. Later in the season, and as production moved into northern districts, mite and disease pressure adversely affected production yields. The outlook for strawberry acreage is expected to be 20% lower for the 2013/14 crop season, which is more in line with 2011 levels. Prices and yields are expected to improve over last year but

can vary significantly. Labor shortages and rising land rents continue to be a challenge for growers across the region, and water shortages may also impact growers in particular areas.

For the California processing tomato industry, 2013 growing conditions were satisfactory. However, in the San Joaquin Valley there were water issues and severe disease pressures which lowered statewide production. The 2013 crop has been finalized at 12.1 million tons, the second year in a row of declining production. Base price for 2013 was around $70.50, considered a breakeven price by many growers. World production was also lower than last year and this is the fourth year in a row of declining world production. Excess inventories from prior years are mostly depleted. All of this has resulted in a drastic shortage of world tomato supply. It is expected that in 2014 the California production will be maximized, subject to limited water availability. There also continues to be pressure to shift acreage from tomatoes toother lucrative cropping alternatives, especially nut crops.

For most citrus growers the 2012-2013 crop year was profitable. The initial estimate was 93 million cartons, with final utilization of 86 million cartons. The estimate for the 2013-14 Navel crop is 88 million cartons, down 2% from last year. Currently the navel shipments are running two weeks ahead of last year. The 2013 lemon crop was smaller in volume and fruit size as compared to the last three years. This was a result of freeze conditions in the desert and the overall lack of rainfall in California. Avocado growers in California during 2013 experienced good prices, with slightly lower total crop estimates from 2012. Domestic per capita consumption continues to increase.

Of the nursery crops, cut flowers had stable to slightly decreasing sales in 2012/2013. Grower profits continue to be moderated by increasing production costs and ongoing competition from low-price South American imports. Imports now account for 73% of U.S. sales, up from just 25% in 1991. Greenhouse tomato prices improved in the summer of 2013 after the weak levels seen in 2012 and early 2013. This was due to a new trade agreement with Mexico, poor weather in Latin America and the bankruptcy of one of the largest domestic producers in Arizona. Greenhouse butter lettuce and cucumber prices remained generally stable. Ornamental container nursery sales generally increased in 2013 as overall demand returned while growers continued to adjust their product mix and right-size their inventory.

The tree fruit industry continues to consolidate each year as larger growers are buying farm land from smaller growers. Currently, there are less than 20 grower/shippers remaining with any attributable volume, and less than 10 that comprise greater than 80% of the industry's total. Total production for 2014 is expected to be on par with last year’s production of about 40-45 million boxes packed. Bearing acreage has decreased, as growers move to newer varieties and some production areas have moved to citrus and nut crops. The


2013 season saw very strong production which combined with average prices to create a good year for most growers.

According to the National Agricultural Statistics Service the 2013 California prune crop is expected to deliver 105,000 dry tons, which will be a 24% decrease in tonnage from 2012. Following the 2012 crop, approximately 7% of total acreage was removed and replanted to more profitable crops such as almonds and walnuts. Total bearing acreage is estimated at 51,000. Due to reduced inventory levels, processors are paying premium prices to growers.

Good production levels, low bug pressure, and continued strong prices led to good returns for alfalfa growers in 2013. Grower returns for alfalfa hay in 2013 ranged from $225/ton to $300/ton (depending on quality) in the San Joaquin Valley, which was approximately the same range realized in 2012. Returns on silage crops in 2013 remained strong and in line with 2012 due to continued high cost of grain corn and short supply of local silage crops.

California grows mostly medium grain Japonica rice, and for 2013 the rice growing season was near perfect. California grower yields and crop quality were better than normal. 2013 harvested acreage is estimated at 550,000 acres, a slight increase over the prior year. A 4% increase in production is expected in 2013, the third year in a row with increased production. The carryover crop is also larger than previous years. Currently, the supply of California rice is larger than historical at a time when demand has declined due to competing production from Australia. The other major rice market (long grain) is also in an over-supply condition. While this is a different market, this does have a dampening effect on all rice markets. All of this points to a 2013 grower price that is expected to decline from 2012, although reduced acreage in 2014 due to water availability issues may reverse this trend.

Foreign competition remains a major concern for a number of commodities including cut flowers, citrus, avocados, selected vegetables, cotton, raisins, wine, and nuts. The weak dollar in the past has helped exports considerably for all agricultural commodities. An increase in the strength of the dollar could weaken demand and returns for many operations.

An additional concern is the drought conditions throughout California, which are now well into the second year. Rainfall and snowpack are well below normal for the second year in a row, and in some cases are at all-time historic lows. Water deliveries to agriculture in 2014 from the state and federal water projects are currently forecast at zero allocation. This will result in heavy reliance on ground water pumping, driving already depleted water tables even lower. If the drought continues through 2014, it is likely there will be reduced production in many commodities throughout California. The economic impact on agricultural producers, and in turn Farm Credit West, is unknown at this time.

We purchase participation interests in loans from otherSystem and non-System entities to generate additional earnings and diversify risk related to existing commodities financed and our geographic area served. In addition, we sell a portion of certain large loans and a portion of our lease portfolio to other System entities and, occasionally, non-System entities, to reduce risk and comply with lending limits we have established. The following table summarizes our three-year history with respect to loan and lease participationsoutstanding. Participations purchased volume includes loan syndications.

December 31, (in thousands) 2013 2012 2011

Participations purchased 833,491$ 682,356$ 537,489$FCW-originated participations sold (1,271,689) (1,061,183) (1,021,047)

Net participations sold (438,198)$ (378,827)$ (483,558)$

Throughout the reporting period, we have pursued a strategic initiative to position ourselves to benefit from enhanced participation relationships with CoBank. It is management’s conclusion that we are adequately compensated for participation interests sold relative to the incremental cost of servicing the “sold” portions of those assets. Accordingly, noservicing asset or liability has been established related to participations sold or purchased.

Farm Credit West’s loan portfolio is diversified to a considerable extent both geographically and by commodity. The average loan (including loan volume serviced for others) had $0.8 million outstanding at year-end 2013. This is a relatively large average loan size, but management does not consider this concentration to be of significant concern given portfolio asset quality, commodity diversity, and collateral values underlying the portfolio. Seven percent of our loan volume is attributable to our ten largest customers. The financial failure of any of these borrowers could materially affect our future operating results. As discussed in the Credit Risk Management section below, management has implemented processes to help control loan size and commodity concentrations.

Portfolio QualityWe review the credit quality of the loan portfolio on an ongoing basis as part of our risk management practices. Each loan is classified according to the Uniform Classification System, which is used by all Farm Credit System institutions. Below are the classification definitions.

Nonadversely Classified Assets Acceptable – Assets are expected to be fully collectible

and represent the highest quality. Other Assets Especially Mentioned – Assets are

currently collectible but exhibit some potential weakness.



Coming off a record crop of 102 million boxes in 2012, the California table grape season is expecting another record crop around 106 million boxes. Prices have tracked very close to last season’s all time high pricing levels; however the pronounced price spike at the end of the California season in 2012 (high $30’s to $40’s) is not expected to repeat, with prices more in the mid to high twenties, which is still very good pricing. Demand has been excellent for most varieties in spite of a large apple and citrus crop. Export sales prices still command a $2-$3 premium over domestic sales prices; however, Red Globes demand is decreasing due to increasing domestic production in China.

The cow/calf sector has experienced a high level of stress on production due to the drought conditions in 2013, with worsening conditions expected for 2014. Many producers that don't have access to irrigated summer pastures have had to sell most if not all of their cow herd. With hay prices running from $250-$300/ton, feeding hay through the summer and fall was not a viable option. Fortunately, cow prices remained strong and many producers have paid loans down or off from the sale of their cow herd. This leaves them the option to purchase bred cows or heifers once feed conditions improve. Fat cattle and feeder cattle prices are athistorically high prices. Declining fed cattle numbers and improved export demand look to push fed cattle prices higher going into 2014. Exports have been increasing, which assists packer profitability and provides price support back through feedlots.

Diversified vegetable farmers largely experienced favorable results in 2013. Labor management has been an issue resulting in higher input and harvest costs. Consumer trends continue to support growth in processed/bagged/prepared vegetables. Water shortages in some Central Valley locations have shifted more product demand to coastal regions which has opened up steady and positive pricing windows. Growers are also experiencing increased demands for organic products, although the price differential from conventionally grown vegetables is nominal. Increased strawberry land demands have created expensive rents for vegetable farmers and in some cases shortages of economic land compatible for vegetable production. The outlook remains positive, but still volatile, for vegetable producers due to high input costs, increasing labor shortages and occasional low commodity prices.

Strawberry production and price trends were generally negative for the 2012/2013 season. This was caused by high volume of strawberry production from Florida and Mexico overlapping the Southern California production window, causing serious oversupply issues. Later in the season, and as production moved into northern districts, mite and disease pressure adversely affected production yields. The outlook for strawberry acreage is expected to be 20% lower for the 2013/14 crop season, which is more in line with 2011 levels. Prices and yields are expected to improve over last year but

can vary significantly. Labor shortages and rising land rents continue to be a challenge for growers across the region, and water shortages may also impact growers in particular areas.

For the California processing tomato industry, 2013 growing conditions were satisfactory. However, in the San Joaquin Valley there were water issues and severe disease pressures which lowered statewide production. The 2013 crop has been finalized at 12.1 million tons, the second year in a row of declining production. Base price for 2013 was around $70.50, considered a breakeven price by many growers. World production was also lower than last year and this is the fourth year in a row of declining world production. Excess inventories from prior years are mostly depleted. All of this has resulted in a drastic shortage of world tomato supply. It is expected that in 2014 the California production will be maximized, subject to limited water availability. There also continues to be pressure to shift acreage from tomatoes toother lucrative cropping alternatives, especially nut crops.

For most citrus growers the 2012-2013 crop year was profitable. The initial estimate was 93 million cartons, with final utilization of 86 million cartons. The estimate for the 2013-14 Navel crop is 88 million cartons, down 2% from last year. Currently the navel shipments are running two weeks ahead of last year. The 2013 lemon crop was smaller in volume and fruit size as compared to the last three years. This was a result of freeze conditions in the desert and the overall lack of rainfall in California. Avocado growers in California during 2013 experienced good prices, with slightly lower total crop estimates from 2012. Domestic per capita consumption continues to increase.

Of the nursery crops, cut flowers had stable to slightly decreasing sales in 2012/2013. Grower profits continue to be moderated by increasing production costs and ongoing competition from low-price South American imports. Imports now account for 73% of U.S. sales, up from just 25% in 1991. Greenhouse tomato prices improved in the summer of 2013 after the weak levels seen in 2012 and early 2013. This was due to a new trade agreement with Mexico, poor weather in Latin America and the bankruptcy of one of the largest domestic producers in Arizona. Greenhouse butter lettuce and cucumber prices remained generally stable. Ornamental container nursery sales generally increased in 2013 as overall demand returned while growers continued to adjust their product mix and right-size their inventory.

The tree fruit industry continues to consolidate each year as larger growers are buying farm land from smaller growers. Currently, there are less than 20 grower/shippers remaining with any attributable volume, and less than 10 that comprise greater than 80% of the industry's total. Total production for 2014 is expected to be on par with last year’s production of about 40-45 million boxes packed. Bearing acreage has decreased, as growers move to newer varieties and some production areas have moved to citrus and nut crops. The


2013 season saw very strong production which combined with average prices to create a good year for most growers.

According to the National Agricultural Statistics Service the 2013 California prune crop is expected to deliver 105,000 dry tons, which will be a 24% decrease in tonnage from 2012. Following the 2012 crop, approximately 7% of total acreage was removed and replanted to more profitable crops such as almonds and walnuts. Total bearing acreage is estimated at 51,000. Due to reduced inventory levels, processors are paying premium prices to growers.

Good production levels, low bug pressure, and continued strong prices led to good returns for alfalfa growers in 2013. Grower returns for alfalfa hay in 2013 ranged from $225/ton to $300/ton (depending on quality) in the San Joaquin Valley, which was approximately the same range realized in 2012. Returns on silage crops in 2013 remained strong and in line with 2012 due to continued high cost of grain corn and short supply of local silage crops.

California grows mostly medium grain Japonica rice, and for 2013 the rice growing season was near perfect. California grower yields and crop quality were better than normal. 2013 harvested acreage is estimated at 550,000 acres, a slight increase over the prior year. A 4% increase in production is expected in 2013, the third year in a row with increased production. The carryover crop is also larger than previous years. Currently, the supply of California rice is larger than historical at a time when demand has declined due to competing production from Australia. The other major rice market (long grain) is also in an over-supply condition. While this is a different market, this does have a dampening effect on all rice markets. All of this points to a 2013 grower price that is expected to decline from 2012, although reduced acreage in 2014 due to water availability issues may reverse this trend.

Foreign competition remains a major concern for a number of commodities including cut flowers, citrus, avocados, selected vegetables, cotton, raisins, wine, and nuts. The weak dollar in the past has helped exports considerably for all agricultural commodities. An increase in the strength of the dollar could weaken demand and returns for many operations.

An additional concern is the drought conditions throughout California, which are now well into the second year. Rainfall and snowpack are well below normal for the second year in a row, and in some cases are at all-time historic lows. Water deliveries to agriculture in 2014 from the state and federal water projects are currently forecast at zero allocation. This will result in heavy reliance on ground water pumping, driving already depleted water tables even lower. If the drought continues through 2014, it is likely there will be reduced production in many commodities throughout California. The economic impact on agricultural producers, and in turn Farm Credit West, is unknown at this time.

We purchase participation interests in loans from otherSystem and non-System entities to generate additional earnings and diversify risk related to existing commodities financed and our geographic area served. In addition, we sell a portion of certain large loans and a portion of our lease portfolio to other System entities and, occasionally, non-System entities, to reduce risk and comply with lending limits we have established. The following table summarizes our three-year history with respect to loan and lease participationsoutstanding. Participations purchased volume includes loan syndications.


Participations purchased 833,491$ 682,356$ 537,489$FCW-originated participations sold (1,271,689) (1,061,183) (1,021,047)

Net participations sold (438,198)$ (378,827)$ (483,558)$

Throughout the reporting period, we have pursued a strategic initiative to position ourselves to benefit from enhanced participation relationships with CoBank. It is management’s conclusion that we are adequately compensated for participation interests sold relative to the incremental cost of servicing the “sold” portions of those assets. Accordingly, noservicing asset or liability has been established related to participations sold or purchased.

Farm Credit West’s loan portfolio is diversified to a considerable extent both geographically and by commodity. The average loan (including loan volume serviced for others) had $0.8 million outstanding at year-end 2013. This is a relatively large average loan size, but management does not consider this concentration to be of significant concern given portfolio asset quality, commodity diversity, and collateral values underlying the portfolio. Seven percent of our loan volume is attributable to our ten largest customers. The financial failure of any of these borrowers could materially affect our future operating results. As discussed in the Credit Risk Management section below, management has implemented processes to help control loan size and commodity concentrations.

Portfolio QualityWe review the credit quality of the loan portfolio on an ongoing basis as part of our risk management practices. Each loan is classified according to the Uniform Classification System, which is used by all Farm Credit System institutions. Below are the classification definitions.

Nonadversely Classified Assets Acceptable – Assets are expected to be fully collectible

and represent the highest quality. Other Assets Especially Mentioned – Assets are

currently collectible but exhibit some potential weakness.



Charge-offs and recoveries by loan type are detailed in the following table.

(dollars in thousands) 2013 2012 2011

Balance at beginning of year 33,200$ 29,600$ 24,200$

Provision for loan losses 12,406 16,046 22,975Charge-offs: Production and intermediate-term loans (10,360) (10,802) (14,592) Real estate mortgage loans (1,141) (1,878) (1,747) Agribusiness loans (79) — (1,087) Direct financing leases — (43) (360) Total charge-offs (11,580) (12,723) (17,786)Recoveries: Production and intermediate-term loans 660 191 102 Real estate mortgage loans 6 — — Agribusiness loans 8 86 109 Direct financing leases — — — Total recoveries 674 277 211 Net charge-offs (10,906) (12,446) (17,575)Balance at December 31 34,700$ 33,200$ 29,600$

Net charge-offs to average loans 0.18% 0.22% 0.32%

The amount of the allowance by loan type is detailed in the following table.


Production and intermediate-term loans 18,672$ 17,884$ 18,350$Real estate mortgage loans 10,152 9,082 6,725Agribusiness loans 4,600 5,086 3,825Direct financing leases 1,076 1,016 631Communication loans 100 74 22Energy loans 100 58 47Total allowance for loan losses 34,700$ 33,200$ 29,600$

The allowance as a percentage of loans outstanding and as a percentage of certain other credit quality indicators is shown below.

December 31, 2013 2012 2011

Allowance as a percentage of: Total loans 0.54% 0.55% 0.52% Total impaired loans 39.05% 24.77% 22.80% Nonaccrual loans 40.27% 26.10% 24.00%

While the financial position of agricultural producers remained relatively strong during 2013 for most of the commodity segments we finance, we have seen declines in the dairy, beef cattle and nursery segments over the past fewyears. Accordingly, we increased the allowance for loan losses to recognize the increased risk of losses in the weaker

commodity segments. Net charge-offs were 0.18% of average loans in 2013 and 0.22% in 2012.

Credit Risk Management

The credit risk in our portfolio arises from the potential failure of a borrower to meet repayment obligations that result in a financial loss. Credit risk is actively managed on an individual and portfolio basis through application of sound lending and underwriting standards, policies, and procedures. Underwriting standards are developed and utilized to determine an applicant’s operational, financial, and management resources available for repaying debt within the term of the notes and loan agreement. Processes are established and followed for information gathering, balance sheet and income statement verification, loan analysis, credit approvals, disbursement of proceeds, and subsequent loan servicing actions. Underwriting standards vary by industry and are updated periodically to reflect market and industry conditions. Among other things, those standards evaluate the following.

Character – borrower integrity and credit history;

Capacity – repayment capacity of the borrower based on cash flows from operations or other sources of income;

Collateral – to protect the lender in the event of default and also serve as a secondary source of loan repayment;

Capital – ability of the operation to survive unanticipated risks; and,

Conditions – intended use of the loan funds, terms, and restrictions.

To help manage and diversify credit risk, our credit risk management framework includes securitizing loans, credit guarantees, and loan participations.

At December 31, 2013, we owned $200 million in Farmer Mac guaranteed securities. These securities arose as part of three securitization transactions in which a total of $1.4 billion of mortgage loans were exchanged for Farmer Mac guaranteed securities. All three transactions occurred prior to 2007. By the end of 2007, we had sold $649 millionof those Farmer Mac securities to AgBank (now CoBank).

At December 31, 2013, risk reduction was achieved on an additional $82 million of loan volume, which was covered under a Long Term Standby Commitment to Purchase agreement (LTSCP) with Farmer Mac. That guaranteed volume totaled $95 million at December 31, 2012 and $98 million at December 31, 2011. The LTSCP guarantee gives us the right to sell the loans identified in the agreement to Farmer Mac in the event a delinquency of four months occurs.

The securitization program and the Farmer Mac standby loan guarantees reduce portfolio risk in return for a reduction in interest income.


Adversely Classified Assets Substandard – Assets exhibit some serious weakness in

repayment capacity, equity, or collateral pledged on the loan.

Doubtful – Assets exhibit similar weaknesses to substandard assets. However, doubtful assets have additional weaknesses in existing facts, conditions and values that make collection in full highly questionable.

Loss – Assets are considered uncollectible.

As shown in the following table, the credit quality of our loanportfolio (principal and interest) improved by 0.6% in 2012and 0.8% in 2013.

December 31, 2013 2012 2011

Nonadversely classified 95.5% 94.7% 94.1%Adversely classified 4.5% 5.3% 5.9%

Adversely classified assets were 4.5% of loans at December 31, 2013. Significant improvement has occurred as overall economic conditions have strengthened since the most recent recession. Many of the remaining adversely classified loans are the result of the financial stress in the dairy industry. Dairy comprises 17% of our total loan portfolio, but 59% of our adversely classified loan volume at December 31, 2013. Farm Credit West’s December 31, 2013loan quality of 95.5% nonadversely classified is still considered relatively strong based on regulatory standards.

Nonearning Assets

The table below summarizes Farm Credit West’s three-year history of year-end nonearning assets.

December 31,(dollars in thousands) 2013 2012 2011

Other property owned 9,634$ 28,974$ 64,140$Nonaccrual loans 86,166 127,194 123,355 Total 95,800$ 156,168$ 187,495$ Total as a percentage of total assets 1.38% 2.34% 2.98% Total as a percentage of total members' equity 6.94% 12.92% 16.82%

Other property owned is comprised of real or personal property that has been acquired through foreclosure, deed in lieu of foreclosure, or other means. Nonaccrual loans represent all loans where there is a reasonable doubt as to collection of principal and interest.

The volume of nonearning assets decreased $60.4 million in 2013, $31.3 million in 2012 and $3.3 million in 2011. The current level of nonearning assets, while manageable, has a negative impact on earnings. Management initiatives are in place to continue to reduce the level of nonearning assets.

During 2013, other property owned decreased $19.3 millionfrom $29.0 million at December 31, 2012 to $9.6 million at December 31, 2013. The decrease included $26.3 million in property dispositions during the year which were partially offset by the acquisition of a $4.8 million winery. In 2012,other property owned decreased $35.1 million. We are actively marketing all other property owned assets and intend to dispose of all properties in an orderly and timely fashion.

During 2013, there were no recorded losses to recognize lower estimated net realizable values on assets held in other property owned. During 2012 and 2011, we recorded losses of $4.1 million and $7.5 million, respectively, to recognize lower estimated net realizable values. The operation and sale of other property owned generated gains of $1.2 million in 2013 and $0.9 million in 2012, and losses of $1.3 million in 2011.

Nonaccrual volume decreased $41.0 million in 2013primarily due to $48.9 million in net repayments, $19.9 million in transfers to accrual status, and $11.6 million in charge-offs. Partially offsetting these decreases, were transfers into nonaccrual of $41.3 million. In general, we are adequately secured on much of the $86.2 million in nonaccrual loan volume outstanding at December 31, 2013.However, we have established specific loan loss allowances of $13.1 million in relation to $42.5 million of the nonaccrual portfolio.

In 2012, nonaccrual volume increased $3.8 million, mainly related to loans in the dairy sector.

Restructured accrual loan volume was $2.7 million at December 31, 2013 and $6.0 million at December 31, 2012.During 2011, there were no restructured accrual loans outstanding. At December 31, 2013, loans totaling $0.1 million were 90 days past due and accruing interest. At December 31, 2012, loans totaling $0.9 million were 90 days past due in accrual status, and at December 31, 2011, accrual loans and leases totaling $6.5 million were 90 days past due.

Allowance for Loan Losses and Loss Experience

The allowance for loan losses for the three most recent yearsis detailed below. The allowance is our best estimate of the amount of probable losses existing in, and inherent in, our loan portfolio as of the balance sheet date. We determine the allowance based on a regular evaluation of the loan portfolio, which generally considers recent and historic charge-off experience among other relevant factors. See Note 2 to the financial statements for more detailed information regarding determining the allowance for loan losses.

Charge-offs net of recoveries totaled $10.9 million in 2013,$12.4 million in 2012, and $17.6 million in 2011. Net loan charge-offs in the last three years have been related mostly to loans in the beef cattle, dairy, and nursery segments.



Charge-offs and recoveries by loan type are detailed in the following table.



Provision for loan losses 12,406 16,046 22,975Charge-offs: Production and intermediate-term loans (10,360) (10,802) (14,592) Real estate mortgage loans (1,141) (1,878) (1,747) Agribusiness loans (79) — (1,087) Direct financing leases — (43) (360) Total charge-offs (11,580) (12,723) (17,786)Recoveries: Production and intermediate-term loans 660 191 102 Real estate mortgage loans 6 — — Agribusiness loans 8 86 109 Direct financing leases — — — Total recoveries 674 277 211 Net charge-offs (10,906) (12,446) (17,575)Balance at December 31 34,700$ 33,200$ 29,600$


The amount of the allowance by loan type is detailed in the following table.


Production and intermediate-term loans 18,672$ 17,884$ 18,350$Real estate mortgage loans 10,152 9,082 6,725Agribusiness loans 4,600 5,086 3,825Direct financing leases 1,076 1,016 631Communication loans 100 74 22Energy loans 100 58 47Total allowance for loan losses 34,700$ 33,200$ 29,600$

The allowance as a percentage of loans outstanding and as a percentage of certain other credit quality indicators is shown below.

December 31, 2013 2012 2011

Allowance as a percentage of: Total loans 0.54% 0.55% 0.52% Total impaired loans 39.05% 24.77% 22.80% Nonaccrual loans 40.27% 26.10% 24.00%

While the financial position of agricultural producers remained relatively strong during 2013 for most of the commodity segments we finance, we have seen declines in the dairy, beef cattle and nursery segments over the past fewyears. Accordingly, we increased the allowance for loan losses to recognize the increased risk of losses in the weaker

commodity segments. Net charge-offs were 0.18% of average loans in 2013 and 0.22% in 2012.

Credit Risk Management

The credit risk in our portfolio arises from the potential failure of a borrower to meet repayment obligations that result in a financial loss. Credit risk is actively managed on an individual and portfolio basis through application of sound lending and underwriting standards, policies, and procedures. Underwriting standards are developed and utilized to determine an applicant’s operational, financial, and management resources available for repaying debt within the term of the notes and loan agreement. Processes are established and followed for information gathering, balance sheet and income statement verification, loan analysis, credit approvals, disbursement of proceeds, and subsequent loan servicing actions. Underwriting standards vary by industry and are updated periodically to reflect market and industry conditions. Among other things, those standards evaluate the following.

Character – borrower integrity and credit history;

Capacity – repayment capacity of the borrower based on cash flows from operations or other sources of income;

Collateral – to protect the lender in the event of default and also serve as a secondary source of loan repayment;

Capital – ability of the operation to survive unanticipated risks; and,

Conditions – intended use of the loan funds, terms, and restrictions.

To help manage and diversify credit risk, our credit risk management framework includes securitizing loans, credit guarantees, and loan participations.

At December 31, 2013, we owned $200 million in Farmer Mac guaranteed securities. These securities arose as part of three securitization transactions in which a total of $1.4 billion of mortgage loans were exchanged for Farmer Mac guaranteed securities. All three transactions occurred prior to 2007. By the end of 2007, we had sold $649 millionof those Farmer Mac securities to AgBank (now CoBank).

At December 31, 2013, risk reduction was achieved on an additional $82 million of loan volume, which was covered under a Long Term Standby Commitment to Purchase agreement (LTSCP) with Farmer Mac. That guaranteed volume totaled $95 million at December 31, 2012 and $98 million at December 31, 2011. The LTSCP guarantee gives us the right to sell the loans identified in the agreement to Farmer Mac in the event a delinquency of four months occurs.

The securitization program and the Farmer Mac standby loan guarantees reduce portfolio risk in return for a reduction in interest income.


Adversely Classified Assets Substandard – Assets exhibit some serious weakness in

repayment capacity, equity, or collateral pledged on the loan.



As shown in the following table, the credit quality of our loanportfolio (principal and interest) improved by 0.6% in 2012and 0.8% in 2013.

December 31, 2013 2012 2011

Nonadversely classified 95.5% 94.7% 94.1%Adversely classified 4.5% 5.3% 5.9%

Adversely classified assets were 4.5% of loans at December 31, 2013. Significant improvement has occurred as overall economic conditions have strengthened since the most recent recession. Many of the remaining adversely classified loans are the result of the financial stress in the dairy industry. Dairy comprises 17% of our total loan portfolio, but 59% of our adversely classified loan volume at December 31, 2013. Farm Credit West’s December 31, 2013loan quality of 95.5% nonadversely classified is still considered relatively strong based on regulatory standards.

Nonearning Assets

The table below summarizes Farm Credit West’s three-year history of year-end nonearning assets.

December 31,(dollars in thousands) 2013 2012 2011

Other property owned 9,634$ 28,974$ 64,140$Nonaccrual loans 86,166 127,194 123,355 Total 95,800$ 156,168$ 187,495$ Total as a percentage of total assets 1.38% 2.34% 2.98% Total as a percentage of total members' equity 6.94% 12.92% 16.82%

Other property owned is comprised of real or personal property that has been acquired through foreclosure, deed in lieu of foreclosure, or other means. Nonaccrual loans represent all loans where there is a reasonable doubt as to collection of principal and interest.

The volume of nonearning assets decreased $60.4 million in 2013, $31.3 million in 2012 and $3.3 million in 2011. The current level of nonearning assets, while manageable, has a negative impact on earnings. Management initiatives are in place to continue to reduce the level of nonearning assets.

During 2013, other property owned decreased $19.3 millionfrom $29.0 million at December 31, 2012 to $9.6 million at December 31, 2013. The decrease included $26.3 million in property dispositions during the year which were partially offset by the acquisition of a $4.8 million winery. In 2012,other property owned decreased $35.1 million. We are actively marketing all other property owned assets and intend to dispose of all properties in an orderly and timely fashion.

During 2013, there were no recorded losses to recognize lower estimated net realizable values on assets held in other property owned. During 2012 and 2011, we recorded losses of $4.1 million and $7.5 million, respectively, to recognize lower estimated net realizable values. The operation and sale of other property owned generated gains of $1.2 million in 2013 and $0.9 million in 2012, and losses of $1.3 million in 2011.

Nonaccrual volume decreased $41.0 million in 2013primarily due to $48.9 million in net repayments, $19.9 million in transfers to accrual status, and $11.6 million in charge-offs. Partially offsetting these decreases, were transfers into nonaccrual of $41.3 million. In general, we are adequately secured on much of the $86.2 million in nonaccrual loan volume outstanding at December 31, 2013.However, we have established specific loan loss allowances of $13.1 million in relation to $42.5 million of the nonaccrual portfolio.

In 2012, nonaccrual volume increased $3.8 million, mainly related to loans in the dairy sector.

Restructured accrual loan volume was $2.7 million at December 31, 2013 and $6.0 million at December 31, 2012.During 2011, there were no restructured accrual loans outstanding. At December 31, 2013, loans totaling $0.1 million were 90 days past due and accruing interest. At December 31, 2012, loans totaling $0.9 million were 90 days past due in accrual status, and at December 31, 2011, accrual loans and leases totaling $6.5 million were 90 days past due.

Allowance for Loan Losses and Loss Experience

The allowance for loan losses for the three most recent yearsis detailed below. The allowance is our best estimate of the amount of probable losses existing in, and inherent in, our loan portfolio as of the balance sheet date. We determine the allowance based on a regular evaluation of the loan portfolio, which generally considers recent and historic charge-off experience among other relevant factors. See Note 2 to the financial statements for more detailed information regarding determining the allowance for loan losses.

Charge-offs net of recoveries totaled $10.9 million in 2013,$12.4 million in 2012, and $17.6 million in 2011. Net loan charge-offs in the last three years have been related mostly to loans in the beef cattle, dairy, and nursery segments.



The key components in the $5.0 million year-over-year increase in net income are as follows:

Net interest income increased $12.7 million mainly due to an increase in average earning assets and $2.5 million in cash basis nonaccrual interest income recognized.

Loan loss provisions were $3.6 million lower in 2013 than 2012, primarily due to lower loan charge-offs.

Partially offsetting the increases noted above:

During 2012, we received a non-recurring $6.2 million distribution from the Farm Credit Insurance Fund which was included in noninterest income. No such distribution was made in 2013.

Noninterest expense increased by $2.3 million from $48.0 million in 2012 to $50.3 million in 2013. The increase was primarily due to increases in salaries and benefits and Farm Credit System Insurance Corporation (FCSIC) premiums. These increases were partially offset by lower losses on other property owned.

Importantly, net interest income increased in all three years presented; the components of the changes in net interest income are discussed below.

For 2012, the $25.4 million decrease in net income was primarily due to the $34.0 million non-recurring AgBank recapitalization distribution received in 2011 and a $15.6 million decrease in CoBank patronage. These decreases were partially offset by lower loan loss provision of $6.9 million, the $6.2 million non-recurring distribution from the Farm credit Insurance Fund and a $5.9 million increase in net interest income.

For 2011, the $71.0 million increase in net income was primarily due to the $34.0 million in non-recurring AgBank recapitalization distribution, a $32.8 million increase in AgBank patronage and a $13.8 million increase in net interest income.

Net Interest Income

Net interest income is our core earnings source, and it increased in absolute dollar terms in each of the three years presented. The net interest margin increased slightly (0.05%) to 2.83% in 2013 from 2.78% in 2012 following a 0.02% decrease from 2011 to 2012. Throughout 2011, 2012 and 2013, market interest rates remained at historic low levels which resulted in higher interest rate spreads than in previous years. In 2013, the interest rate spread increased 0.07% to 2.61% compared with 2.54% in 2012. The interest rate spread had decreased 0.02% in 2012, from 2.56% in 2011.

The following tables also show our growth in average total interest earning assets and average equity financing.

Average(dollars in thousands) Balance Interest Rate

Net interest income componentsInterest earning assets: Loans and leases 6,112,113$ 240,795$ 3.94% Investment securities 211,281 8,498 4.02% Total interest earning assets 6,323,394 249,293 3.94%

Interest-bearing liabilities: Note payable to CoBank/ AgBank and other 4,934,312 66,784 1.35% Future payment funds 356,119 3,558 1.00% Total interest-bearing liabilities 5,290,431 70,342 1.33%

Interest rate spread 2.61%

Impact of equity financing 1,032,963$ 0.22%

Net interest income and net interest margin 178,951$ 2.83%

2013





Impact of equity financing 887,197$ 0.24%


2012


Participation activity, as well as the transactions with Farmer Mac, helps reduce portfolio risk from commodity, geographic, and loan size concentrations.

Our volume of transactions with Farmer Mac presents counterparty risk. The Farmer Mac risk is “secondary” in that we rely primarily on customer loan repayments. As part of our counterparty risk policy, during 2013, we completed an analysis of our relationship with Farmer Mac. That analysis found that our counterparty risk with Farmer Mac was within policy guidelines related to potential impacts on capital and potential impacts on return on equity. Other than the contractual obligations arising from these Farmer Mac business transactions, Farmer Mac is not liable for any debt or obligation of ours and we are not liable for any debt or obligation of Farmer Mac. For more information on Farmer Mac, refer to their website at www.farmermac.com.

Fees paid to Farmer Mac for loans and securities related to loans we originated (including fees related to securities now owned by CoBank) totaled $1.8 million in 2013, $2.2 million in 2012, and $2.6 million in 2011.

The majority of the loans we originate are farm real estate loans secured by a first mortgage on the pledged collateral. Production and intermediate-term lending accounts for most of the remaining volume and is also typically secured. Collateral evaluations are made within FCA and Uniform Standards of Professional Appraisal Practices requirements. All property is appraised at market value. All collateral evaluations are performed by a qualified appraiser. Certain appraisals must be performed by individuals with a state certification or license.

Over the years, we have taken several actions to analyze and reduce the overall level of risk inherent in the loan portfolio.

We have established internal lending limits that are considerably lower than those established by regulation or lending delegations from CoBank. Our limits differentiate among customers based on risk. We have adopted an individual loan size maximum of approximately 5% of risk funds for our highest quality customers. Risk funds are defined as permanent capital plus the allowance for loan losses.

We have established internal lending delegations to properly control the loan approval process. Delegations to staff are based on our risk-bearing ability, loan size, complexity, type and risk, as well as the expertise of the credit staff member. Larger and more complex loans are typically subject to our prior approval process, which involves review and approval by our most experienced and knowledgeable credit staff.

We use a Combined System Risk Model (model) to assess risk. The model is a two dimensional risk rating system that measures each loan’s probability of default (the likelihood of a borrower defaulting in the next twelve months) and loss given default (an estimate of the anticipated loss on each

loan, should the borrower default in the next 12 months). The model is utilized in loan and portfolio management processes (including allowance for loan losses estimates) providing a more detailed risk evaluation, particularly related to loans classified Acceptable under the Uniform Classification System. Information from the model is integrated into our Economic Capital analysis, which is discussed in more detail below.

Results of Operations Net Income Summary

As shown in the table below, net income for 2013 was $156 million, compared with $151 million in 2012, and $177 million in 2011. The following is a summary of major components of change in net income over the last three years.

2013 2012 2011versus versus versus

(in thousands) 2012 2011 2010

Net income, prior year 151,472$ 176,849$ 105,818$ Increase (decrease) due to: Net interest income 12,677 5,925 13,794 Provision for loan losses 3,640 6,929 74 Noninterest income (9,052) (40,857) 63,282 Noninterest expense (2,288) 3,438 (6,716) Provision for income taxes 5 (812) 597 Total (decrease) increase in net income 4,982 (25,377) 71,031 Net income, current year 156,454$ 151,472$ 176,849$

The earnings shown above are before patronage payments of $53 million to be made from 2013 earnings, $51 million which were paid from 2012 net income, and $33 million which were paid from 2011 net income. Net income also does not include other comprehensive losses of $1 million recorded in 2013 and $2 million recorded in 2012, or other comprehensive income of less than $1 million recorded in 2011. Further, preferred stock dividends paid from net income totaled $4 million in 2013, $4 million in 2012, and $5 million in 2011.

The following table reflects our earnings history relative to asset and equity levels.

Year ended December 31, 2013 2012 2011

Net income as a percentage of: Average assets 2.36% 2.40% 2.92% Average members’ equity 11.91% 12.71% 16.80%

Net income increased $5.0 million in 2013 following a decrease of $25.4 million in 2012 and a $71.0 million increase in 2011.



The key components in the $5.0 million year-over-year increase in net income are as follows:

Net interest income increased $12.7 million mainly due to an increase in average earning assets and $2.5 million in cash basis nonaccrual interest income recognized.

Loan loss provisions were $3.6 million lower in 2013 than 2012, primarily due to lower loan charge-offs.

Partially offsetting the increases noted above:

During 2012, we received a non-recurring $6.2 million distribution from the Farm Credit Insurance Fund which was included in noninterest income. No such distribution was made in 2013.

Noninterest expense increased by $2.3 million from $48.0 million in 2012 to $50.3 million in 2013. The increase was primarily due to increases in salaries and benefits and Farm Credit System Insurance Corporation (FCSIC) premiums. These increases were partially offset by lower losses on other property owned.

Importantly, net interest income increased in all three years presented; the components of the changes in net interest income are discussed below.

For 2012, the $25.4 million decrease in net income was primarily due to the $34.0 million non-recurring AgBank recapitalization distribution received in 2011 and a $15.6 million decrease in CoBank patronage. These decreases were partially offset by lower loan loss provision of $6.9 million, the $6.2 million non-recurring distribution from the Farm credit Insurance Fund and a $5.9 million increase in net interest income.

For 2011, the $71.0 million increase in net income was primarily due to the $34.0 million in non-recurring AgBank recapitalization distribution, a $32.8 million increase in AgBank patronage and a $13.8 million increase in net interest income.

Net Interest Income

Net interest income is our core earnings source, and it increased in absolute dollar terms in each of the three years presented. The net interest margin increased slightly (0.05%) to 2.83% in 2013 from 2.78% in 2012 following a 0.02% decrease from 2011 to 2012. Throughout 2011, 2012 and 2013, market interest rates remained at historic low levels which resulted in higher interest rate spreads than in previous years. In 2013, the interest rate spread increased 0.07% to 2.61% compared with 2.54% in 2012. The interest rate spread had decreased 0.02% in 2012, from 2.56% in 2011.

The following tables also show our growth in average total interest earning assets and average equity financing.





Impact of equity financing 1,032,963$ 0.22%


2013







2012


Participation activity, as well as the transactions with Farmer Mac, helps reduce portfolio risk from commodity, geographic, and loan size concentrations.

Our volume of transactions with Farmer Mac presents counterparty risk. The Farmer Mac risk is “secondary” in that we rely primarily on customer loan repayments. As part of our counterparty risk policy, during 2013, we completed an analysis of our relationship with Farmer Mac. That analysis found that our counterparty risk with Farmer Mac was within policy guidelines related to potential impacts on capital and potential impacts on return on equity. Other than the contractual obligations arising from these Farmer Mac business transactions, Farmer Mac is not liable for any debt or obligation of ours and we are not liable for any debt or obligation of Farmer Mac. For more information on Farmer Mac, refer to their website at www.farmermac.com.

Fees paid to Farmer Mac for loans and securities related to loans we originated (including fees related to securities now owned by CoBank) totaled $1.8 million in 2013, $2.2 million in 2012, and $2.6 million in 2011.

The majority of the loans we originate are farm real estate loans secured by a first mortgage on the pledged collateral. Production and intermediate-term lending accounts for most of the remaining volume and is also typically secured. Collateral evaluations are made within FCA and Uniform Standards of Professional Appraisal Practices requirements. All property is appraised at market value. All collateral evaluations are performed by a qualified appraiser. Certain appraisals must be performed by individuals with a state certification or license.

Over the years, we have taken several actions to analyze and reduce the overall level of risk inherent in the loan portfolio.

We have established internal lending limits that are considerably lower than those established by regulation or lending delegations from CoBank. Our limits differentiate among customers based on risk. We have adopted an individual loan size maximum of approximately 5% of risk funds for our highest quality customers. Risk funds are defined as permanent capital plus the allowance for loan losses.

We have established internal lending delegations to properly control the loan approval process. Delegations to staff are based on our risk-bearing ability, loan size, complexity, type and risk, as well as the expertise of the credit staff member. Larger and more complex loans are typically subject to our prior approval process, which involves review and approval by our most experienced and knowledgeable credit staff.

We use a Combined System Risk Model (model) to assess risk. The model is a two dimensional risk rating system that measures each loan’s probability of default (the likelihood of a borrower defaulting in the next twelve months) and loss given default (an estimate of the anticipated loss on each

loan, should the borrower default in the next 12 months). The model is utilized in loan and portfolio management processes (including allowance for loan losses estimates) providing a more detailed risk evaluation, particularly related to loans classified Acceptable under the Uniform Classification System. Information from the model is integrated into our Economic Capital analysis, which is discussed in more detail below.

Results of Operations Net Income Summary

As shown in the table below, net income for 2013 was $156 million, compared with $151 million in 2012, and $177 million in 2011. The following is a summary of major components of change in net income over the last three years.


(in thousands) 2012 2011 2010

Net income, prior year 151,472$ 176,849$ 105,818$ Increase (decrease) due to: Net interest income 12,677 5,925 13,794 Provision for loan losses 3,640 6,929 74 Noninterest income (9,052) (40,857) 63,282 Noninterest expense (2,288) 3,438 (6,716) Provision for income taxes 5 (812) 597 Total (decrease) increase in net income 4,982 (25,377) 71,031 Net income, current year 156,454$ 151,472$ 176,849$

The earnings shown above are before patronage payments of $53 million to be made from 2013 earnings, $51 million which were paid from 2012 net income, and $33 million which were paid from 2011 net income. Net income also does not include other comprehensive losses of $1 million recorded in 2013 and $2 million recorded in 2012, or other comprehensive income of less than $1 million recorded in 2011. Further, preferred stock dividends paid from net income totaled $4 million in 2013, $4 million in 2012, and $5 million in 2011.

The following table reflects our earnings history relative to asset and equity levels.

Year ended December 31, 2013 2012 2011

Net income as a percentage of: Average assets 2.36% 2.40% 2.92% Average members’ equity 11.91% 12.71% 16.80%

Net income increased $5.0 million in 2013 following a decrease of $25.4 million in 2012 and a $71.0 million increase in 2011.



For the year ended December 31, Percent(in thousands) 2012 2011 Change

Patronage income 28,595$ 43,299$ (34.0%)AgBank recapitalization distribution — 34,006 —Loan and other fees 9,413 6,842 37.6%Farm Credit Insurance Fund distribution 6,232 — —Loan servicing income 4,420 4,731 (6.6%)Other noninterest income 746 1,385 (46.1%) Total noninterest income 49,406$ 90,263$ (45.3%)

The decrease in noninterest income in 2013 was due primarily to a $6.2 million refund received in 2012 from the FCSIC representing our allocated portion of the excess amount in the System’s Insurance Fund above the 2% secure base amount. The FCSIC made no such distribution in 2013. Additionally, a $1.6 million prepayment penalty fee to terminate make-whole funding and lower loan servicing income due to expected runoff in this portfolio contributed to the decrease in 2013 noninterest income.

Most of the decrease in noninterest income in 2012 was due to transactions relating to AgBank’s merger with CoBank. As part of the merger agreement and reorganization, AgBank initiated a non-recurring recapitalization distribution to its member associations in December 2011 which resulted in noninterest income to Farm Credit West of $34.0 million and an increase in our investment in AgBank (now CoBank).

AgBank also declared patronage of $13.8 million in December 2011, prior to its merger with CoBank, relating to its 2011 earnings. In addition, we received cash patronage of $23.3 million in March 2011 relating to 2010 AgBank earnings. Combined, this resulted in AgBank patronage income of $37.1 million in 2011, compared with CoBank patronage of $21.5 million in 2012, and $22.2 million in 2013.

Noninterest Expense

The dollar amounts and year-over-year percentage changes in each noninterest expense component are reported in the following tables.


Salaries and employee benefits 30,175$ 26,685$ 13.1%Information technology services 4,495 4,894 (8.2%)Occupancy and equipment 3,276 2,754 19.0%Supervisory and examination 1,405 1,465 (4.1%)Other operating expense 7,378 6,579 12.1% Total operating expense 46,729 42,377 10.3%Insurance Fund premiums 4,746 2,402 97.6%(Gain) loss on other property owned, net (1,159) 3,249 (135.7%) Total noninterest expense 50,316$ 48,028$ 4.8%


Salaries and employee benefits 26,685$ 24,304$ 9.8%Information technology services 4,894 4,686 4.4%Occupancy and equipment 2,754 2,564 7.4%Supervisory and examination 1,465 1,458 0.5%Other operating expense 6,579 6,497 1.3% Total operating expense 42,377 39,509 7.3%Insurance Fund premiums 2,402 3,140 (23.5%)Loss on other property owned, net 3,249 8,817 (63.2%) Total noninterest expense 48,028$ 51,466$ (6.7%)

Our operating and noninterest expenses have been well controlled, particularly in light of our earning asset size. The control of expense is a key component in providing “added value” to our customers. Total noninterest expense increased $2.3 million in 2013 following a $3.4 million decrease in 2012. The 2013 increase was primarily due to a $3.5 million increase in salaries and benefits and a $2.3 million increase in FCSIC insurance premiums due to a significant increase in premium rates. These increases were partially offset by a favorable variance on other property owned gains and losses. In 2012, we recorded losses of $4.1 million to recognize lower estimated net realizable values of certain other property owned, while there were no net realizable value losses recorded in 2013. In 2011, we recorded $7.5 million in losses to recognize lower other property owned values.

We measure our operating efficiency using a ratio of our noninterest expense (excluding other property owned gains/losses) to combined revenue, which is defined as net interest income and noninterest income. This banking industry standard ratio, termed the Operating Efficiency Ratio, reflects the dollars expended to generate a dollar of revenue. For example, our Operating Efficiency Ratio was 23.4% in 2013, thus it took 23.4 cents to generate a dollar of revenue. The Operating Efficiency Ratio was 20.9% in 2012








2011

Since 2009, the financial market for debt instruments has remained fairly stable. Combined with the growth in earning assets, an adequate spread is an important component of our net interest income and net income growth. The historically low interest rate environment prevalent since 2009 hasreduced the impact of equity financing on net interest income despite higher levels of average equity. For the three years presented, the Association’s average equity financing increased primarily due to net earnings and increasing levels of preferred stock outstanding.

The following table provides a breakdown of changes in net interest income over the three most recent years based on:(1) changes in the dollar volumes of assets and liabilities and (2) changes to interest rates acting on those assets and liabilities.


(in thousands) 2012 2011 2010

Net interest income, prior year 166,274$ 160,349$ 146,555$Increase (decrease) due to: Changes in volume of assets and liabilities 11,232 8,325 2,030 Changes in interest rates (183) (1,486) 10,636 Changes in income on nonaccrual loans 1,628 (914) 1,128 Total increase in net interest income 12,677 5,925 13,794Net interest income, current year 178,951$ 166,274$ 160,349$

In 2013, average earning asset volume increased 5.5% and was the primary factor contributing to the increase in net interest income. Average earning asset volume increased 4.4% in 2012. Volume variance was a secondary factor in 2011 as average earning asset growth was only 0.2%. In 2011, the primary factor was a steady decrease in long-term interest rates which resulted in a favorable funding environment.

Provision for Loan Losses

Changes in the allowance for loan losses impact the Consolidated Statement of Comprehensive Income when the allowance is increased through a provision for loan losses or decreased through loan loss reversals. We review our loan portfolio on a regular basis to determine if any increase through provision for loan losses or decrease through a loan loss reversal in our allowance for loan losses is necessary based on our assessment of the probable losses in our loan portfolio. We recorded provisions for loan losses of$12.4 million in 2013, $16.0 million in 2012, and $23.0 million in 2011.

The 2013 provision for loan losses was primarily related to $10.9 million in net loan charge-offs during the year and a $1.5 million increase in estimated losses inherent in the portfolio. The 2012 provision for loan losses was primarily related to $12.4 million in net loan charge-offs during the year and a $3.6 million increase in estimated losses inherent in the portfolio at December 31, 2012. The 2011 provision for loan losses was primarily related to $17.6 million in netloan charge-offs during the year and a $5.4 million increasein estimated losses inherent in the portfolio.

Noninterest Income

Total noninterest income decreased $9.0 million in 2013.During 2013, we recorded noninterest income of $40.4 million, compared with $49.4 million in 2012, and $90.3 million 2011.


Patronage income 29,200$ 28,595$ 2.1%Loan and other fees 8,966 9,413 (4.7%)Farm Credit Insurance Fund distribution — 6,232 —Loan servicing income 3,820 4,420 (13.6%)Other noninterest (expense) income (1,632) 746 (318.8%) Total noninterest income 40,354$ 49,406$ (18.3%)




Patronage income 28,595$ 43,299$ (34.0%)AgBank recapitalization distribution — 34,006 —Loan and other fees 9,413 6,842 37.6%Farm Credit Insurance Fund distribution 6,232 — —Loan servicing income 4,420 4,731 (6.6%)Other noninterest income 746 1,385 (46.1%) Total noninterest income 49,406$ 90,263$ (45.3%)

The decrease in noninterest income in 2013 was due primarily to a $6.2 million refund received in 2012 from the FCSIC representing our allocated portion of the excess amount in the System’s Insurance Fund above the 2% secure base amount. The FCSIC made no such distribution in 2013. Additionally, a $1.6 million prepayment penalty fee to terminate make-whole funding and lower loan servicing income due to expected runoff in this portfolio contributed to the decrease in 2013 noninterest income.

Most of the decrease in noninterest income in 2012 was due to transactions relating to AgBank’s merger with CoBank. As part of the merger agreement and reorganization, AgBank initiated a non-recurring recapitalization distribution to its member associations in December 2011 which resulted in noninterest income to Farm Credit West of $34.0 million and an increase in our investment in AgBank (now CoBank).

AgBank also declared patronage of $13.8 million in December 2011, prior to its merger with CoBank, relating to its 2011 earnings. In addition, we received cash patronage of $23.3 million in March 2011 relating to 2010 AgBank earnings. Combined, this resulted in AgBank patronage income of $37.1 million in 2011, compared with CoBank patronage of $21.5 million in 2012, and $22.2 million in 2013.

Noninterest Expense

The dollar amounts and year-over-year percentage changes in each noninterest expense component are reported in the following tables.


Salaries and employee benefits 30,175$ 26,685$ 13.1%Information technology services 4,495 4,894 (8.2%)Occupancy and equipment 3,276 2,754 19.0%Supervisory and examination 1,405 1,465 (4.1%)Other operating expense 7,378 6,579 12.1% Total operating expense 46,729 42,377 10.3%Insurance Fund premiums 4,746 2,402 97.6%(Gain) loss on other property owned, net (1,159) 3,249 (135.7%) Total noninterest expense 50,316$ 48,028$ 4.8%


Salaries and employee benefits 26,685$ 24,304$ 9.8%Information technology services 4,894 4,686 4.4%Occupancy and equipment 2,754 2,564 7.4%Supervisory and examination 1,465 1,458 0.5%Other operating expense 6,579 6,497 1.3% Total operating expense 42,377 39,509 7.3%Insurance Fund premiums 2,402 3,140 (23.5%)Loss on other property owned, net 3,249 8,817 (63.2%) Total noninterest expense 48,028$ 51,466$ (6.7%)

Our operating and noninterest expenses have been well controlled, particularly in light of our earning asset size. The control of expense is a key component in providing “added value” to our customers. Total noninterest expense increased $2.3 million in 2013 following a $3.4 million decrease in 2012. The 2013 increase was primarily due to a $3.5 million increase in salaries and benefits and a $2.3 million increase in FCSIC insurance premiums due to a significant increase in premium rates. These increases were partially offset by a favorable variance on other property owned gains and losses. In 2012, we recorded losses of $4.1 million to recognize lower estimated net realizable values of certain other property owned, while there were no net realizable value losses recorded in 2013. In 2011, we recorded $7.5 million in losses to recognize lower other property owned values.

We measure our operating efficiency using a ratio of our noninterest expense (excluding other property owned gains/losses) to combined revenue, which is defined as net interest income and noninterest income. This banking industry standard ratio, termed the Operating Efficiency Ratio, reflects the dollars expended to generate a dollar of revenue. For example, our Operating Efficiency Ratio was 23.4% in 2013, thus it took 23.4 cents to generate a dollar of revenue. The Operating Efficiency Ratio was 20.9% in 2012








2011

Since 2009, the financial market for debt instruments has remained fairly stable. Combined with the growth in earning assets, an adequate spread is an important component of our net interest income and net income growth. The historically low interest rate environment prevalent since 2009 hasreduced the impact of equity financing on net interest income despite higher levels of average equity. For the three years presented, the Association’s average equity financing increased primarily due to net earnings and increasing levels of preferred stock outstanding.

The following table provides a breakdown of changes in net interest income over the three most recent years based on:(1) changes in the dollar volumes of assets and liabilities and (2) changes to interest rates acting on those assets and liabilities.


(in thousands) 2012 2011 2010

Net interest income, prior year 166,274$ 160,349$ 146,555$Increase (decrease) due to: Changes in volume of assets and liabilities 11,232 8,325 2,030 Changes in interest rates (183) (1,486) 10,636 Changes in income on nonaccrual loans 1,628 (914) 1,128 Total increase in net interest income 12,677 5,925 13,794Net interest income, current year 178,951$ 166,274$ 160,349$

In 2013, average earning asset volume increased 5.5% and was the primary factor contributing to the increase in net interest income. Average earning asset volume increased 4.4% in 2012. Volume variance was a secondary factor in 2011 as average earning asset growth was only 0.2%. In 2011, the primary factor was a steady decrease in long-term interest rates which resulted in a favorable funding environment.

Provision for Loan Losses

Changes in the allowance for loan losses impact the Consolidated Statement of Comprehensive Income when the allowance is increased through a provision for loan losses or decreased through loan loss reversals. We review our loan portfolio on a regular basis to determine if any increase through provision for loan losses or decrease through a loan loss reversal in our allowance for loan losses is necessary based on our assessment of the probable losses in our loan portfolio. We recorded provisions for loan losses of$12.4 million in 2013, $16.0 million in 2012, and $23.0 million in 2011.

The 2013 provision for loan losses was primarily related to $10.9 million in net loan charge-offs during the year and a $1.5 million increase in estimated losses inherent in the portfolio. The 2012 provision for loan losses was primarily related to $12.4 million in net loan charge-offs during the year and a $3.6 million increase in estimated losses inherent in the portfolio at December 31, 2012. The 2011 provision for loan losses was primarily related to $17.6 million in netloan charge-offs during the year and a $5.4 million increasein estimated losses inherent in the portfolio.

Noninterest Income

Total noninterest income decreased $9.0 million in 2013.During 2013, we recorded noninterest income of $40.4 million, compared with $49.4 million in 2012, and $90.3 million 2011.


Patronage income 29,200$ 28,595$ 2.1%Loan and other fees 8,966 9,413 (4.7%)Farm Credit Insurance Fund distribution — 6,232 —Loan servicing income 3,820 4,420 (13.6%)Other noninterest (expense) income (1,632) 746 (318.8%) Total noninterest income 40,354$ 49,406$ (18.3%)



interest spreads. Interest rates charged are based on the following factors: the competitive rate environment; the interest rate charged by CoBank; our existing rates and spreads; and, our profitability and capital accumulation objectives.

Customer-owned interest-bearing future payment funds continue to be an important funding source for us and a convenient benefit for our customers. Year-end 2013, 2012, and 2011 balances in those accounts were $352 million, $332 million, and $257 million, respectively. The interest rate on those accounts is targeted to give customers a competitive return at a cost to us that is similar to our short term funding cost from CoBank.

Members’ Equity Amounts of Capital

Capital supports asset growth and provides protection for unexpected credit and operating losses. Capital is also needed for investments in new products and services. A sound capital position is critical to our long-term financial success due to the volatility and cycles in agriculture.

Over the past several years, we have been able to build capital through net income (after patronage payments) and with our preferred stock program (after dividend payments thereon). Members’ equity at December 31, 2013 totaled $1.4 billion, compared with $1.2 billion at December 31, 2012, and $1.1 billion at December 31, 2011. Members’ equity includes common and preferred stock purchased by our customers and retained earnings accumulated through net income, less preferred stock dividends and patronage distributed to customers. Members’ equity also includes accumulated other comprehensive income. Our capital position is reflected in the following ratio comparisons.

December 31, 2013 2012 2011

Members’ equity as a percent of total assets 19.92% 18.13% 17.74%Ratio of debt to members’ equity 4.0 to 1 4.5 to 1 4.6 to 1

Capital Composition

Our retained earnings increased $99 million to $1.101 billion at December 31, 2013, up from $1.002 billion at December 31, 2012. This increase was a result of net income of $156 million, partially offset by $53 million of patronage distributions and $4 million of preferred stock dividends. Steady growth in both retained earnings and total members’ equity is shown in the following table. This growth provides increased protection for the level of member-purchased equities outstanding.

Total members’ equity as reported below is net of accrued patronage dividends and preferred stock dividends.


Unallocated retained earnings 1,101,448$ 1,002,456$ 905,955$ Preferred stock 271,438 198,336 198,336 Capital stock and participation certificates 3,978 3,847 3,816 Accumulated other comprehensive income 3,039 4,063 6,312

Total members' equity 1,379,903$ 1,208,702$ 1,114,419$

We have two sources of other comprehensive income (loss): one related to unrealized losses on investment securities – available-for-sale; and, the other related to an unrecognized net actuarial loss on a defined benefit pension plan. These items are discussed in Notes 2, 4, 9, and 12 to the financial statements.

Customer-owned Equities

Since we are a cooperative, each customer is required to make a common equity investment in our capital stock (for agricultural producers) or participation certificates (for non-producers). At December 31, 2013 (and for all periods presented), the required investment was $1 thousand per voting stockholder. Customers with multiple loans under common control satisfy their equity ownership requirement with a single $1 thousand cash investment.

Our common equity holders may voluntarily invest in our preferred stock. At December 31, 2013, preferred stock investments totaled $271 million. Purchases are limited to $4 million per eligible customer.

Both forms of customer-owned equity investments are at-risk. Retirement of common or preferred stock is at the sole discretion of the Board, or by our president when consistent with authority delegated by the Board and President & CEO.

Patronage Dividend Program

We have a patronage dividend program that allows us to distribute a portion of our net earnings to our shareholders. This program provides for the allocation of net earnings in the manner described in our Bylaws. When determining the amount and method of patronage to be distributed, the Board considers the setting aside of funds to increase retained earnings in order to (1) meet capital adequacy standards established by Farm Credit regulations, (2) meet our internal capital adequacy standards to support competitive pricing at targeted earnings levels, and (3) maintain reasonable reserves. Patronage distributions are based on business done with us during the year. The Board declared patronage distributions of $53 million in 2013, $51 million in 2012, and $33 million in 2011; these cash payments are made shortly after the end of the year for which the dividends are declared.


and 17.8% in 2011. Both of those years included non-recurring noninterest income that skewed the ratio lower, mainly the FCSIC refund in 2012 and the bank merger-related transactions in 2011. For all three years presented Farm Credit West was among the most efficient of all Farm Credit associations.

Benefit from Income Taxes

We recorded provisions for income taxes of $0.1 million in 2013 and 2012, and a benefit from income taxes of $0.7 million in 2011. The 2011 tax benefit was the result of deferred tax liabilities reversing, primarily relating to our portfolio of operating and true leases.

In 2011, 2012 and 2013, patronage distribution deductions offset substantially all taxable income.

Liquidity and Funding Sources

As shown in the tables on pages 21 and 22, average equity financing, as a measure of our liquidity, has increased from $758 million in 2011 to $1,033 million in 2013 – an increase of $275 million. While most of this increase is related to our profitability, approximately $73 million of the two-year improvement is related to increased preferred stock investments made by our customers. The preferred stock program was implemented in 2003 and has grown consistently with a balance of $271.4 million at December 31, 2013. In July 2013, stockholders and the FCA authorized an increase in the preferred stock maximum from $200 million to $500 million. While $500 million shares are authorized for issuance, we remain subject to a regulatory imposed maximum equal to 25% of point-in-time capital ($300 million at December 31, 2013) and an internal issuance limit of $285 million. The preferred stock program enhances capital and provides a competitive return to our customer/investors.

Our policy is to maintain adequate liquidity, which enhances core earnings, minimizes the impact from future adversities, and enhances the probability that patronage dividends can continue to be paid to customers. Once the preferred stock program reaches the imposed maximum, future increases in liquidity will primarily come from continued earnings. We anticipate liquidity levels will be adequate to meet our obligations.

Currently, our liquidity from external sources is largely dependent on obtaining funds from CoBank or other sources. CoBank’s primary source of funds is the sale of securities through the Federal Farm Credit Banks Funding Corporation. We also could enhance liquidity via the sale of loan and lease participations or securities.

Our primary source of liquidity is the ability to obtain funds for operations through our borrowing relationship with CoBank. The note payable to CoBank is collateralized by a pledge to CoBank of substantially all of our assets.

Substantially all cash received is applied to the note payable and substantially all cash disbursements are drawn on the note payable. Our indebtedness to CoBank is governed by a financing agreement. That agreement is subject to periodic renewal in accordance with normal business practices. The annual average principal balances of the note payable to CoBank (and predecessor AgBank) were $4.9 billion in 2013, $4.8 billion in 2012, and $4.8 billion in 2011.

The average interest rate paid to CoBank during 2013 was 1.35% while the weighted average interest rate at December 31, 2013 was 1.33% as shown in the following table. At December 31, 2013, the note payable to CoBank consisted of the following components.

(dollars in thousands) WeightedAverage

Interest Rate Product Type Interest Rate Balance

Variable rate component 0.43% 2,532,623$ Fixed rate component 2.22% 2,573,547 Prime, LIBOR, Adjustable rate component 1.58% 2,785

Total note payable to CoBank 1.33% 5,108,955$

Variable interest rates are set administratively. Fixed rates are significantly influenced by market rates at the time a customer elects to fix their rate. LIBOR, adjustable, and prime rate-based interest rates are tied to market indices. Due to the higher funding costs, we have generally limited the use of interest rate products tied to market indices.

Funds Management and Interest Rate Risk Our asset/liability management policy calls for interest rate risk to be minimized. The interest rate risk inherent in our loan portfolio is substantially mitigated through our funding relationship with CoBank, which allows loans to be match-funded. Borrowings from CoBank match the pricing, maturity, and option characteristics of our loans to customers. CoBank manages interest rate risk through their direct note pricing and asset/liability management processes.

Although CoBank incurs and manages the primary sources of interest rate risk, we are still exposed to interest rate risk from the impact of interest rate changes on earnings generated from assets funded with our equity.

The interest rate products we offer include variable, fixed, and adjustable/indexed interest rate products/programs. While some of those loan products provide reasonable flexibility in the maintenance of net interest income in the face of interest rate, operating expense, and liquidity changes, certain programs involve the establishment of a fixed spread over our cost of funds. Given the long-term nature of many of our loan assets, the extent to which these fixed spreads limit net interest income makes it important that we maintain appropriate control of operating expenses and nonearning assets. We also monitor and limit the duration of fixed



interest spreads. Interest rates charged are based on the following factors: the competitive rate environment; the interest rate charged by CoBank; our existing rates and spreads; and, our profitability and capital accumulation objectives.

Customer-owned interest-bearing future payment funds continue to be an important funding source for us and a convenient benefit for our customers. Year-end 2013, 2012, and 2011 balances in those accounts were $352 million, $332 million, and $257 million, respectively. The interest rate on those accounts is targeted to give customers a competitive return at a cost to us that is similar to our short term funding cost from CoBank.

Members’ Equity Amounts of Capital

Capital supports asset growth and provides protection for unexpected credit and operating losses. Capital is also needed for investments in new products and services. A sound capital position is critical to our long-term financial success due to the volatility and cycles in agriculture.

Over the past several years, we have been able to build capital through net income (after patronage payments) and with our preferred stock program (after dividend payments thereon). Members’ equity at December 31, 2013 totaled $1.4 billion, compared with $1.2 billion at December 31, 2012, and $1.1 billion at December 31, 2011. Members’ equity includes common and preferred stock purchased by our customers and retained earnings accumulated through net income, less preferred stock dividends and patronage distributed to customers. Members’ equity also includes accumulated other comprehensive income. Our capital position is reflected in the following ratio comparisons.

December 31, 2013 2012 2011

Members’ equity as a percent of total assets 19.92% 18.13% 17.74%Ratio of debt to members’ equity 4.0 to 1 4.5 to 1 4.6 to 1

Capital Composition

Our retained earnings increased $99 million to $1.101 billion at December 31, 2013, up from $1.002 billion at December 31, 2012. This increase was a result of net income of $156 million, partially offset by $53 million of patronage distributions and $4 million of preferred stock dividends. Steady growth in both retained earnings and total members’ equity is shown in the following table. This growth provides increased protection for the level of member-purchased equities outstanding.

Total members’ equity as reported below is net of accrued patronage dividends and preferred stock dividends.


Unallocated retained earnings 1,101,448$ 1,002,456$ 905,955$ Preferred stock 271,438 198,336 198,336 Capital stock and participation certificates 3,978 3,847 3,816 Accumulated other comprehensive income 3,039 4,063 6,312

Total members' equity 1,379,903$ 1,208,702$ 1,114,419$

We have two sources of other comprehensive income (loss): one related to unrealized losses on investment securities – available-for-sale; and, the other related to an unrecognized net actuarial loss on a defined benefit pension plan. These items are discussed in Notes 2, 4, 9, and 12 to the financial statements.

Customer-owned Equities

Since we are a cooperative, each customer is required to make a common equity investment in our capital stock (for agricultural producers) or participation certificates (for non-producers). At December 31, 2013 (and for all periods presented), the required investment was $1 thousand per voting stockholder. Customers with multiple loans under common control satisfy their equity ownership requirement with a single $1 thousand cash investment.

Our common equity holders may voluntarily invest in our preferred stock. At December 31, 2013, preferred stock investments totaled $271 million. Purchases are limited to $4 million per eligible customer.

Both forms of customer-owned equity investments are at-risk. Retirement of common or preferred stock is at the sole discretion of the Board, or by our president when consistent with authority delegated by the Board and President & CEO.

Patronage Dividend Program

We have a patronage dividend program that allows us to distribute a portion of our net earnings to our shareholders. This program provides for the allocation of net earnings in the manner described in our Bylaws. When determining the amount and method of patronage to be distributed, the Board considers the setting aside of funds to increase retained earnings in order to (1) meet capital adequacy standards established by Farm Credit regulations, (2) meet our internal capital adequacy standards to support competitive pricing at targeted earnings levels, and (3) maintain reasonable reserves. Patronage distributions are based on business done with us during the year. The Board declared patronage distributions of $53 million in 2013, $51 million in 2012, and $33 million in 2011; these cash payments are made shortly after the end of the year for which the dividends are declared.


and 17.8% in 2011. Both of those years included non-recurring noninterest income that skewed the ratio lower, mainly the FCSIC refund in 2012 and the bank merger-related transactions in 2011. For all three years presented Farm Credit West was among the most efficient of all Farm Credit associations.

Benefit from Income Taxes

We recorded provisions for income taxes of $0.1 million in 2013 and 2012, and a benefit from income taxes of $0.7 million in 2011. The 2011 tax benefit was the result of deferred tax liabilities reversing, primarily relating to our portfolio of operating and true leases.

In 2011, 2012 and 2013, patronage distribution deductions offset substantially all taxable income.

Liquidity and Funding Sources

As shown in the tables on pages 21 and 22, average equity financing, as a measure of our liquidity, has increased from $758 million in 2011 to $1,033 million in 2013 – an increase of $275 million. While most of this increase is related to our profitability, approximately $73 million of the two-year improvement is related to increased preferred stock investments made by our customers. The preferred stock program was implemented in 2003 and has grown consistently with a balance of $271.4 million at December 31, 2013. In July 2013, stockholders and the FCA authorized an increase in the preferred stock maximum from $200 million to $500 million. While $500 million shares are authorized for issuance, we remain subject to a regulatory imposed maximum equal to 25% of point-in-time capital ($300 million at December 31, 2013) and an internal issuance limit of $285 million. The preferred stock program enhances capital and provides a competitive return to our customer/investors.

Our policy is to maintain adequate liquidity, which enhances core earnings, minimizes the impact from future adversities, and enhances the probability that patronage dividends can continue to be paid to customers. Once the preferred stock program reaches the imposed maximum, future increases in liquidity will primarily come from continued earnings. We anticipate liquidity levels will be adequate to meet our obligations.

Currently, our liquidity from external sources is largely dependent on obtaining funds from CoBank or other sources. CoBank’s primary source of funds is the sale of securities through the Federal Farm Credit Banks Funding Corporation. We also could enhance liquidity via the sale of loan and lease participations or securities.

Our primary source of liquidity is the ability to obtain funds for operations through our borrowing relationship with CoBank. The note payable to CoBank is collateralized by a pledge to CoBank of substantially all of our assets.

Substantially all cash received is applied to the note payable and substantially all cash disbursements are drawn on the note payable. Our indebtedness to CoBank is governed by a financing agreement. That agreement is subject to periodic renewal in accordance with normal business practices. The annual average principal balances of the note payable to CoBank (and predecessor AgBank) were $4.9 billion in 2013, $4.8 billion in 2012, and $4.8 billion in 2011.

The average interest rate paid to CoBank during 2013 was 1.35% while the weighted average interest rate at December 31, 2013 was 1.33% as shown in the following table. At December 31, 2013, the note payable to CoBank consisted of the following components.

(dollars in thousands) WeightedAverage

Interest Rate Product Type Interest Rate Balance

Variable rate component 0.43% 2,532,623$ Fixed rate component 2.22% 2,573,547 Prime, LIBOR, Adjustable rate component 1.58% 2,785

Total note payable to CoBank 1.33% 5,108,955$

Variable interest rates are set administratively. Fixed rates are significantly influenced by market rates at the time a customer elects to fix their rate. LIBOR, adjustable, and prime rate-based interest rates are tied to market indices. Due to the higher funding costs, we have generally limited the use of interest rate products tied to market indices.

Funds Management and Interest Rate Risk Our asset/liability management policy calls for interest rate risk to be minimized. The interest rate risk inherent in our loan portfolio is substantially mitigated through our funding relationship with CoBank, which allows loans to be match-funded. Borrowings from CoBank match the pricing, maturity, and option characteristics of our loans to customers. CoBank manages interest rate risk through their direct note pricing and asset/liability management processes.

Although CoBank incurs and manages the primary sources of interest rate risk, we are still exposed to interest rate risk from the impact of interest rate changes on earnings generated from assets funded with our equity.

The interest rate products we offer include variable, fixed, and adjustable/indexed interest rate products/programs. While some of those loan products provide reasonable flexibility in the maintenance of net interest income in the face of interest rate, operating expense, and liquidity changes, certain programs involve the establishment of a fixed spread over our cost of funds. Given the long-term nature of many of our loan assets, the extent to which these fixed spreads limit net interest income makes it important that we maintain appropriate control of operating expenses and nonearning assets. We also monitor and limit the duration of fixed



annual gross sales of agricultural or aquatic products at the date the loan was originally made. (We establish our quantitative objectives and measure our results using only the number of operations with sales in excess of $10 thousand.)

Our YBS Mission Statement We will encourage the financing of young, beginning and small farmers, ranchers and producers or harvesters of aquatic products by implementing a program designed to meet the needs of these applicants to the fullest extent of their creditworthiness. The Association will support government efforts to provide beginning farmer assistance through special programs.

Demographics

The following table outlines the percentage of each type of YBS operation in the market as a whole (the “Percent of Market” column) and the percentage of our portfolio that is made up of each type of YBS loan (the “Farm Credit West Percent” column) at December 31, 2013. For example, using the 2007 U.S. Department of Agriculture (USDA) Census there were 12,885 farms with sales of greater than $10 thousand in our territory; 6% of those operations are classified as “Young,” while at December 31, 2013, 13% of our customers were “Young.”

Total Number Percent of Farm Creditin Market Market West Percent

Farms with sales > $10,000 12,885

Young Farmer 6% 13% Beginning Farmer 63% 22% Small Farmer 69% 19%

The 2007 USDA Agricultural Census is the latest demographic information available.

Young Farmer Loans: The table shows that 13% of our total loan and lease customer base is in the young category – well in excess of the “Percent of Market” of 6% of farms with sales in excess of $10 thousand.

Beginning Farmer Loans: The table shows 22% of our customer base is in the beginning category, compared with the “Percent of Market” of 63% of farms with sales in excess of $10 thousand.

Small Farmer Loans: The table shows 19% of our customer base is in the small category, compared with the “Percent of Market” of 69% of farms with sales in excess of $10 thousand.

YBS Qualitative Goals We establish annual marketing goals with the objective of increasing our market share of loans to YBS farmers and ranchers. Our goals emphasize:

Promoting related services, either directly or in coordination with others, that are responsive to the needs of YBS farmers and ranchers in our territory;

Coordinating credit and services offered with other System institutions as well as with governmental and private sources of credit who offer credit and services to YBS farmers and ranchers in our territory; and,

Implementing effective outreach programs to attract YBS farmers and ranchers.

YBS Outreach Programs

Our YBS outreach programs include the following.

Young Farmer and Rancher Executive Institute: We began the Young Farmer and Rancher Executive Institute to provide a combination of real-life scenarios and sound professionally-developed theory to generations transitioning from farm employees to management. This program is partnered with professors from California Polytechnic State University, San Luis Obispo (Cal Poly) who designed a hands-on curriculum to meet the needs of our YBS customers.

Internships: We provide about six to ten college students each year a paid internship (in addition to college units). They get the opportunity to gain practical experience and explore careers in agriculture. The ten-week program provides the interning students hands-on experience in ag-finance and real estate appraisal.

College Scholarships: Each school year, we award a number of college scholarships to students with majors directly related to agriculture. Currently we are providing $1 thousand per year to about 40 scholars. We will be providing $1.5 thousand per scholar in 2014.

Loan Contest: We sponsor a loan contest in conjunction with Cal Poly, which provides an opportunity for students to experience reality-based loan scenarios and make recommendations based upon their credit analysis. Teams of two or three students are given a few weeks to complete written credit analyses. The top five groups present their recommendations and loan conditions to a panel of our staff members, who grade the teams on presentation skills and credit understanding.

High School Ag-Finance Contest: We provide local FFA chapters and area high school agriculture departments an opportunity to excel in ag-finance. Working with their local high school instructors, local participants are given two months to expand their knowledge of ag-finance and the Farm Credit System. The top three individuals from each participating high school are selected to compete in our “Ag Finance Quiz.” We not only facilitate the activities, we provide prize money to the ag department of the team which scores highest on the written quiz.


The Board also approves the allocation of the remainder of our net income available for distribution in the form of nonqualified written notices of allocation. This amount has been added to Farm Credit West’s unallocated retained earnings account. The Board considers these earnings to be permanently invested in Farm Credit West and there is no plan to revolve or redeem these amounts. Typically, we have a small amount of non-patronage sourced operations, which produce a small amount of net income (or loss). However, in 2011, we also recorded $34.0 million in non-recurring AgBank recapitalization income as non-patronage sourced income. The 2011 recapitalization distribution was related to AgBank retained earnings from years prior to 2007.

Capital Adequacy

Each year, our Board establishes a formal capital adequacy plan that addresses capital targets in relation to risks. Capital adequacy plans assess the capital level necessary for financial viability and to provide for growth. Our plan is updated annually and approved by our Board. The capital adequacy plan identifies key risk components and estimates capital levels to compensate for those risks. The plan encompasses credit risk, loan concentrations, participated loans, allowance for loan losses levels, loan growth, and other key risk factors.

Farm Credit regulations establish minimum capital standards expressed as a ratio of capital to assets, taking into account relative risk factors for all System institutions. In general, the regulations provide for a relative risk weighting of assets and establish a minimum ratio of permanent capital, total surplus and core surplus to risk-adjusted assets. If regulatory minimums are not met, regulatory action may be taken (potentially including a prohibition from retiring equities and making certain distributions to equity holders).

As shown in the following table, Farm Credit West substantially exceeded each regulatory minimum capital requirement for the quarters ended December 31, 2013, 2012, and 2011. Further, the fourth quarter 2013 capital ratios are in excess of the 13% target capital levels established by the Board in their 2013 Capital Adequacy Plan.

Type of capital as % of Regulatory risk-adjusted assets 2013 2012 2011 Minimum

Permanent capital 18.62% 16.99% 16.12% 7.00%Total surplus 14.46% 13.70% 12.62% 7.00%Core surplus 14.35% 13.56% 12.47% 3.50%

For the quarter ended December 31,

In 2011, 2012 and 2013, all three capital ratios increased due to additions to capital through net earnings and a slower rate of growth in risk-adjusted assets.

As reflected in the Capital Composition section of this report, members’ equity is primarily composed of retained earnings. Similarly, retained earnings is the primary component of each

of the three types of capital used to determine the regulatory capital ratios above. Preferred stock is the key component that makes permanent capital higher than total and core surplus. The costs associated with the preferred stock program are appropriate given the corporate objectives facilitated by the program.

Economic Capital

Risk is an inherent part of our business activities. The Association’s capital management framework is intended to ensure there is sufficient capital to support the underlying risks of its business activities, exceed all regulatory capital requirements, and achieve certain capital adequacy objectives. Farm Credit West uses economic capital software, methodologies, and assumptions to quantify the capital requirements related to primary areas of risk. We periodically quantify our economic capital requirements, based on the credit risk, interest rate risk, operational risk, and market risk inherent in our operations. Due to the evolving nature of economic capital, it is anticipated that we will continue to refine our methodologies and assumptions. Any refinement of these methodologies and assumptions could result in a material change to economic capital.

Economic capital is a measure of risk and is defined as the amount of capital required to absorb potential unexpected losses resulting from extremely severe events over a one-year period. Our economic capital analyses indicate we have total capital equivalent to the amount of economic capital required to meet a “AA” solvency standard, which equates to a default only three times in 10,000 situational simulations. This means the likelihood of incurring losses in excess of the required economic capital amount is estimated to be similar to the likelihood of a “AA” rated bond defaulting (0.03% probability).

Young, Beginning, and Small Farmer and Rancher Program Definitions We have specific young, beginning, and small farmer and rancher programs to provide the credit and related needs of young, beginning, and small (YBS) customers and potential customers in our chartered territory. The definitions of YBS farmers and ranchers follow.

Young: A farmer, rancher, or producer or harvester of aquatic products who was age 35 or younger as of the date the loan was originally made.

Beginning: A farmer, rancher, or producer or harvester of aquatic products who had 10 years or less farming or ranching experience as of the date the loan was originally made.

Small: A farmer, rancher, or producer or harvester of aquatic products who normally generated less than $250 thousand in



annual gross sales of agricultural or aquatic products at the date the loan was originally made. (We establish our quantitative objectives and measure our results using only the number of operations with sales in excess of $10 thousand.)

Our YBS Mission Statement We will encourage the financing of young, beginning and small farmers, ranchers and producers or harvesters of aquatic products by implementing a program designed to meet the needs of these applicants to the fullest extent of their creditworthiness. The Association will support government efforts to provide beginning farmer assistance through special programs.

Demographics

The following table outlines the percentage of each type of YBS operation in the market as a whole (the “Percent of Market” column) and the percentage of our portfolio that is made up of each type of YBS loan (the “Farm Credit West Percent” column) at December 31, 2013. For example, using the 2007 U.S. Department of Agriculture (USDA) Census there were 12,885 farms with sales of greater than $10 thousand in our territory; 6% of those operations are classified as “Young,” while at December 31, 2013, 13% of our customers were “Young.”

Total Number Percent of Farm Creditin Market Market West Percent

Farms with sales > $10,000 12,885

Young Farmer 6% 13% Beginning Farmer 63% 22% Small Farmer 69% 19%

The 2007 USDA Agricultural Census is the latest demographic information available.

Young Farmer Loans: The table shows that 13% of our total loan and lease customer base is in the young category – well in excess of the “Percent of Market” of 6% of farms with sales in excess of $10 thousand.

Beginning Farmer Loans: The table shows 22% of our customer base is in the beginning category, compared with the “Percent of Market” of 63% of farms with sales in excess of $10 thousand.

Small Farmer Loans: The table shows 19% of our customer base is in the small category, compared with the “Percent of Market” of 69% of farms with sales in excess of $10 thousand.

YBS Qualitative Goals We establish annual marketing goals with the objective of increasing our market share of loans to YBS farmers and ranchers. Our goals emphasize:

Promoting related services, either directly or in coordination with others, that are responsive to the needs of YBS farmers and ranchers in our territory;

Coordinating credit and services offered with other System institutions as well as with governmental and private sources of credit who offer credit and services to YBS farmers and ranchers in our territory; and,

Implementing effective outreach programs to attract YBS farmers and ranchers.

YBS Outreach Programs

Our YBS outreach programs include the following.

Young Farmer and Rancher Executive Institute: We began the Young Farmer and Rancher Executive Institute to provide a combination of real-life scenarios and sound professionally-developed theory to generations transitioning from farm employees to management. This program is partnered with professors from California Polytechnic State University, San Luis Obispo (Cal Poly) who designed a hands-on curriculum to meet the needs of our YBS customers.

Internships: We provide about six to ten college students each year a paid internship (in addition to college units). They get the opportunity to gain practical experience and explore careers in agriculture. The ten-week program provides the interning students hands-on experience in ag-finance and real estate appraisal.

College Scholarships: Each school year, we award a number of college scholarships to students with majors directly related to agriculture. Currently we are providing $1 thousand per year to about 40 scholars. We will be providing $1.5 thousand per scholar in 2014.

Loan Contest: We sponsor a loan contest in conjunction with Cal Poly, which provides an opportunity for students to experience reality-based loan scenarios and make recommendations based upon their credit analysis. Teams of two or three students are given a few weeks to complete written credit analyses. The top five groups present their recommendations and loan conditions to a panel of our staff members, who grade the teams on presentation skills and credit understanding.

High School Ag-Finance Contest: We provide local FFA chapters and area high school agriculture departments an opportunity to excel in ag-finance. Working with their local high school instructors, local participants are given two months to expand their knowledge of ag-finance and the Farm Credit System. The top three individuals from each participating high school are selected to compete in our “Ag Finance Quiz.” We not only facilitate the activities, we provide prize money to the ag department of the team which scores highest on the written quiz.


The Board also approves the allocation of the remainder of our net income available for distribution in the form of nonqualified written notices of allocation. This amount has been added to Farm Credit West’s unallocated retained earnings account. The Board considers these earnings to be permanently invested in Farm Credit West and there is no plan to revolve or redeem these amounts. Typically, we have a small amount of non-patronage sourced operations, which produce a small amount of net income (or loss). However, in 2011, we also recorded $34.0 million in non-recurring AgBank recapitalization income as non-patronage sourced income. The 2011 recapitalization distribution was related to AgBank retained earnings from years prior to 2007.

Capital Adequacy

Each year, our Board establishes a formal capital adequacy plan that addresses capital targets in relation to risks. Capital adequacy plans assess the capital level necessary for financial viability and to provide for growth. Our plan is updated annually and approved by our Board. The capital adequacy plan identifies key risk components and estimates capital levels to compensate for those risks. The plan encompasses credit risk, loan concentrations, participated loans, allowance for loan losses levels, loan growth, and other key risk factors.

Farm Credit regulations establish minimum capital standards expressed as a ratio of capital to assets, taking into account relative risk factors for all System institutions. In general, the regulations provide for a relative risk weighting of assets and establish a minimum ratio of permanent capital, total surplus and core surplus to risk-adjusted assets. If regulatory minimums are not met, regulatory action may be taken (potentially including a prohibition from retiring equities and making certain distributions to equity holders).

As shown in the following table, Farm Credit West substantially exceeded each regulatory minimum capital requirement for the quarters ended December 31, 2013, 2012, and 2011. Further, the fourth quarter 2013 capital ratios are in excess of the 13% target capital levels established by the Board in their 2013 Capital Adequacy Plan.

Type of capital as % of Regulatory risk-adjusted assets 2013 2012 2011 Minimum

Permanent capital 18.62% 16.99% 16.12% 7.00%Total surplus 14.46% 13.70% 12.62% 7.00%Core surplus 14.35% 13.56% 12.47% 3.50%

For the quarter ended December 31,

In 2011, 2012 and 2013, all three capital ratios increased due to additions to capital through net earnings and a slower rate of growth in risk-adjusted assets.

As reflected in the Capital Composition section of this report, members’ equity is primarily composed of retained earnings. Similarly, retained earnings is the primary component of each

of the three types of capital used to determine the regulatory capital ratios above. Preferred stock is the key component that makes permanent capital higher than total and core surplus. The costs associated with the preferred stock program are appropriate given the corporate objectives facilitated by the program.

Economic Capital

Risk is an inherent part of our business activities. The Association’s capital management framework is intended to ensure there is sufficient capital to support the underlying risks of its business activities, exceed all regulatory capital requirements, and achieve certain capital adequacy objectives. Farm Credit West uses economic capital software, methodologies, and assumptions to quantify the capital requirements related to primary areas of risk. We periodically quantify our economic capital requirements, based on the credit risk, interest rate risk, operational risk, and market risk inherent in our operations. Due to the evolving nature of economic capital, it is anticipated that we will continue to refine our methodologies and assumptions. Any refinement of these methodologies and assumptions could result in a material change to economic capital.

Economic capital is a measure of risk and is defined as the amount of capital required to absorb potential unexpected losses resulting from extremely severe events over a one-year period. Our economic capital analyses indicate we have total capital equivalent to the amount of economic capital required to meet a “AA” solvency standard, which equates to a default only three times in 10,000 situational simulations. This means the likelihood of incurring losses in excess of the required economic capital amount is estimated to be similar to the likelihood of a “AA” rated bond defaulting (0.03% probability).

Young, Beginning, and Small Farmer and Rancher Program Definitions We have specific young, beginning, and small farmer and rancher programs to provide the credit and related needs of young, beginning, and small (YBS) customers and potential customers in our chartered territory. The definitions of YBS farmers and ranchers follow.

Young: A farmer, rancher, or producer or harvester of aquatic products who was age 35 or younger as of the date the loan was originally made.

Beginning: A farmer, rancher, or producer or harvester of aquatic products who had 10 years or less farming or ranching experience as of the date the loan was originally made.

Small: A farmer, rancher, or producer or harvester of aquatic products who normally generated less than $250 thousand in


Report of Management

Farm Credit West’s financial statements are prepared by management, who are responsible for their integrity and objectivity, including amounts that must necessarily be based on judgments and estimates. In the opinion of management, the accompanying financial statements fairly present Farm Credit West’s financial condition and results of operations, in conformity with generally accepted accounting principles appropriate in the circumstances. Other financial information included in this 2013 Annual Report is consistent with that in the financial statements.

To meet its responsibility for reliable financial information, management depends on Farm Credit West’s accounting and internal control systems, which have been designed to provide reasonable, but not absolute, assurance that assets are safeguarded and transactions are properly authorized and recorded. These systems have been designed to recognize that the cost must be related to the benefits derived. To monitor compliance, Farm Credit West’s internal auditors and review staff perform audits of the accounting records, review accounting systems and internal controls, and recommend improvements as needed. The financial statements are audited by PricewaterhouseCoopers LLP, independent auditors, who consider internal controls in connection with the audit of Farm Credit West’s financial statements in accordance with auditing standards generally accepted in the United States of America. Farm Credit West is also examined by the Farm Credit System’s regulator, the Farm Credit Administration (FCA).

Farm Credit West has adopted a standard of conduct policy that applies to each director and employee. Annually, the Board of Directors (Board) and senior management review potential exceptions to that policy. Actions are taken to eliminate or control situations determined to be exceptions. The Board has established a complaint procedure for accounting, financial reporting, internal control, and auditing matters which allows confidential and anonymous submission of concerns.

Farm Credit West’s principal executives and chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. For the purposes of this report, “internal control over financial reporting” is defined as a process designed by, or under the supervision of Farm Credit West’s principal executives and chief financial officer, and effected by the Board, managers, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting information and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management has completed an assessment of the effectiveness of Farm Credit West’s internal control over financial reporting as of December 31, 2013. Based on the assessment performed, management concluded that as of December 31, 2013, the Association’s internal control over financial reporting was effective. Additionally, based on this assessment, Farm Credit West determined that there were no material weaknesses in internal control over financial reporting as of December 31, 2013. No significant changes have occurred in Farm Credit West’s internal control processes or procedures over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

The Board is composed of directors who are not employees and who have met independence criteria established in the Farm Credit West Board of Directors’ Charter. The Board has established an Audit Committee which has oversight responsibilities for Farm Credit West’s system of internal controls and financial reporting. This Annual Report has been prepared under the oversight of the Audit Committee. The Audit Committee consults regularly with management and meets periodically with the independent auditors and internal auditors to review the scope and results of their work. The independent auditors and internal auditors have direct access to the Audit Committee.

The undersigned certify that this 2013 Annual Report has been prepared in accordance with all applicable statutory or regulatory requirements, that the information contained herein is true, accurate, and complete to the best of our knowledge and belief, and that we have reviewed this report.

Blake Harlan

Chairman of the Board of Directors Mark D. Littlefield

President and Chief Executive Officer Christopher J. Doherty

Executive Vice President – Fiscal Operations

Chief Financial Officer March 10, 2014


Agribusiness Chair at Cal Poly: This outreach is to develop farmer/agribusiness-related seminars that will be available to our customers. The program also funds a professorship and three new advanced finance and appraisal classes.

Multicultural Scholars in Agriculture at Fresno State: In 2012, FCW coordinated with American AgCredit, Fresno-Madera Farm Credit and CoBank and contributed $90,000 to Fresno State University. This contribution was used to establish an endowment in our names to support Multicultural Scholars in Agriculture. Future contributions to this endowment fund may be made by each of the participating organizations.

YBS Quantitative Programs

We have developed quantitative targets to guide our progress in serving YBS customers. In 2013, our goals were expressed as a percentage of the total number of YBS loans of each type in our territory. For example, below, our goal for December 31, 2013 was to be serving 14% of the estimated 8,843 “Small” operations in our territory; we met that goal for 2013. Goals for the small farmer area are based on number of farmers and ranchers with gross farm income over $10 thousand. (For 2013, our young farmer results are not meaningful due to an anomaly in the census data. While the 2007 census data reports 758 young farmers in our territory, our YBS results show more than 758 young farmers as Farm Credit West customers.)

Young Beginning SmallFarmer Farmer Farmer

Number of YBS Loans in Market 758 8,145 8,843

Farm Credit West YBS ResultsDecember 31, 2013 N/A 18% 15%

Farm Credit West YBS GoalsDecember 31, 2013 N/A 23% 14%

Quantitative targets beginning in 2014 are expressed in terms of the number of new loans to each of the YBS segments as is noted in the following table.


Farm Credit West YBS Goals - New LoansDecember 31, 2014 172 320 208December 31, 2015 180 336 218December 31, 2016 189 352 229

Management provides quarterly reports to our Board detailing the number, volume, and credit quality of our YBS customers.

YBS Program Safety and Soundness

We established a small loan function in 2003 to better serve YBS customers. Service to those customers through that

function has expanded each year. Procedures have been established to streamline the delivery of small loans utilizing credit scoring. Loans will continue to be made on a sound basis, with proper emphasis on the fundamentals of sound credit. Loans made under this program meet all our requirements for eligibility and scope of financing, interest rates, and length of term. Co-makers and guarantors (financially responsible family members or other individuals) and secondary collateral are utilized when available and appropriate to minimize risk. Excessively ambitious growth plans are restricted.

Forward-Looking Information

This discussion contains forward-looking statements. These statements are not guarantees of future performance; future operations involve certain risks, uncertainties, and assumptions that are difficult to predict. Words such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” or “will” are intended to identify forward-looking statements. These statements are based on management’s assumptions and analyses made in light of experience and other historical trends, current conditions, and expected future developments. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. Readers are cautioned not to place undue reliance on these forward-looking statements. We will not update any forward-looking statements to reflect events or circumstances arising after they are made.

Critical Accounting Policies and Estimates

Our financial statements are based on accounting principles generally accepted in the United States of America. Our significant accounting policies are critical to the understanding of our results of operations and financial position because some accounting policies require us to make complex or subjective judgments and estimates that may affect the value of certain assets or liabilities. These policies are considered critical because we have to make judgments about matters that are inherently uncertain. For a complete discussion of significant accounting policies see Note 2 to the financial statements.

Customer Privacy

Customer financial privacy and the security of other non-public information are important to Farm Credit West. Therefore, we hold customer financial and other non-public information in strictest confidence. Federal regulations allow Farm Credit West to disclose customer information to others only in certain situations. Examples of these situations include legal or law enforcement proceedings; when such information is requested by another Farm Credit System or other financial institution with which customers do business or; consumer reporting agencies.


Report of Management

Farm Credit West’s financial statements are prepared by management, who are responsible for their integrity and objectivity, including amounts that must necessarily be based on judgments and estimates. In the opinion of management, the accompanying financial statements fairly present Farm Credit West’s financial condition and results of operations, in conformity with generally accepted accounting principles appropriate in the circumstances. Other financial information included in this 2013 Annual Report is consistent with that in the financial statements.

To meet its responsibility for reliable financial information, management depends on Farm Credit West’s accounting and internal control systems, which have been designed to provide reasonable, but not absolute, assurance that assets are safeguarded and transactions are properly authorized and recorded. These systems have been designed to recognize that the cost must be related to the benefits derived. To monitor compliance, Farm Credit West’s internal auditors and review staff perform audits of the accounting records, review accounting systems and internal controls, and recommend improvements as needed. The financial statements are audited by PricewaterhouseCoopers LLP, independent auditors, who consider internal controls in connection with the audit of Farm Credit West’s financial statements in accordance with auditing standards generally accepted in the United States of America. Farm Credit West is also examined by the Farm Credit System’s regulator, the Farm Credit Administration (FCA).

Farm Credit West has adopted a standard of conduct policy that applies to each director and employee. Annually, the Board of Directors (Board) and senior management review potential exceptions to that policy. Actions are taken to eliminate or control situations determined to be exceptions. The Board has established a complaint procedure for accounting, financial reporting, internal control, and auditing matters which allows confidential and anonymous submission of concerns.

Farm Credit West’s principal executives and chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. For the purposes of this report, “internal control over financial reporting” is defined as a process designed by, or under the supervision of Farm Credit West’s principal executives and chief financial officer, and effected by the Board, managers, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting information and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management has completed an assessment of the effectiveness of Farm Credit West’s internal control over financial reporting as of December 31, 2013. Based on the assessment performed, management concluded that as of December 31, 2013, the Association’s internal control over financial reporting was effective. Additionally, based on this assessment, Farm Credit West determined that there were no material weaknesses in internal control over financial reporting as of December 31, 2013. No significant changes have occurred in Farm Credit West’s internal control processes or procedures over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

The Board is composed of directors who are not employees and who have met independence criteria established in the Farm Credit West Board of Directors’ Charter. The Board has established an Audit Committee which has oversight responsibilities for Farm Credit West’s system of internal controls and financial reporting. This Annual Report has been prepared under the oversight of the Audit Committee. The Audit Committee consults regularly with management and meets periodically with the independent auditors and internal auditors to review the scope and results of their work. The independent auditors and internal auditors have direct access to the Audit Committee.

The undersigned certify that this 2013 Annual Report has been prepared in accordance with all applicable statutory or regulatory requirements, that the information contained herein is true, accurate, and complete to the best of our knowledge and belief, and that we have reviewed this report.

Blake Harlan

Chairman of the Board of Directors Mark D. Littlefield

President and Chief Executive Officer Christopher J. Doherty

Executive Vice President – Fiscal Operations

Chief Financial Officer March 10, 2014


Agribusiness Chair at Cal Poly: This outreach is to develop farmer/agribusiness-related seminars that will be available to our customers. The program also funds a professorship and three new advanced finance and appraisal classes.

Multicultural Scholars in Agriculture at Fresno State: In 2012, FCW coordinated with American AgCredit, Fresno-Madera Farm Credit and CoBank and contributed $90,000 to Fresno State University. This contribution was used to establish an endowment in our names to support Multicultural Scholars in Agriculture. Future contributions to this endowment fund may be made by each of the participating organizations.

YBS Quantitative Programs

We have developed quantitative targets to guide our progress in serving YBS customers. In 2013, our goals were expressed as a percentage of the total number of YBS loans of each type in our territory. For example, below, our goal for December 31, 2013 was to be serving 14% of the estimated 8,843 “Small” operations in our territory; we met that goal for 2013. Goals for the small farmer area are based on number of farmers and ranchers with gross farm income over $10 thousand. (For 2013, our young farmer results are not meaningful due to an anomaly in the census data. While the 2007 census data reports 758 young farmers in our territory, our YBS results show more than 758 young farmers as Farm Credit West customers.)


Number of YBS Loans in Market 758 8,145 8,843

Farm Credit West YBS ResultsDecember 31, 2013 N/A 18% 15%

Farm Credit West YBS GoalsDecember 31, 2013 N/A 23% 14%

Quantitative targets beginning in 2014 are expressed in terms of the number of new loans to each of the YBS segments as is noted in the following table.


Farm Credit West YBS Goals - New LoansDecember 31, 2014 172 320 208December 31, 2015 180 336 218December 31, 2016 189 352 229

Management provides quarterly reports to our Board detailing the number, volume, and credit quality of our YBS customers.

YBS Program Safety and Soundness

We established a small loan function in 2003 to better serve YBS customers. Service to those customers through that

function has expanded each year. Procedures have been established to streamline the delivery of small loans utilizing credit scoring. Loans will continue to be made on a sound basis, with proper emphasis on the fundamentals of sound credit. Loans made under this program meet all our requirements for eligibility and scope of financing, interest rates, and length of term. Co-makers and guarantors (financially responsible family members or other individuals) and secondary collateral are utilized when available and appropriate to minimize risk. Excessively ambitious growth plans are restricted.

Forward-Looking Information

This discussion contains forward-looking statements. These statements are not guarantees of future performance; future operations involve certain risks, uncertainties, and assumptions that are difficult to predict. Words such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” or “will” are intended to identify forward-looking statements. These statements are based on management’s assumptions and analyses made in light of experience and other historical trends, current conditions, and expected future developments. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. Readers are cautioned not to place undue reliance on these forward-looking statements. We will not update any forward-looking statements to reflect events or circumstances arising after they are made.

Critical Accounting Policies and Estimates

Our financial statements are based on accounting principles generally accepted in the United States of America. Our significant accounting policies are critical to the understanding of our results of operations and financial position because some accounting policies require us to make complex or subjective judgments and estimates that may affect the value of certain assets or liabilities. These policies are considered critical because we have to make judgments about matters that are inherently uncertain. For a complete discussion of significant accounting policies see Note 2 to the financial statements.

Customer Privacy

Customer financial privacy and the security of other non-public information are important to Farm Credit West. Therefore, we hold customer financial and other non-public information in strictest confidence. Federal regulations allow Farm Credit West to disclose customer information to others only in certain situations. Examples of these situations include legal or law enforcement proceedings; when such information is requested by another Farm Credit System or other financial institution with which customers do business or; consumer reporting agencies.


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The Disclosure Information section of this Annual Report describes the Audit Committee’s policy/charter guidance, its composition and current membership, and its primary functions. The Committee’s responsibilities are described more fully in Farm Credit West’s Internal Audit Policy and Audit Committee Charter.

During 2013, the Farm Credit West Audit Committee (the Committee) met seven times to fulfill its responsibilities. The Committee’s responsibilities include monitoring and overseeing the financial reporting process. In this context, the Committee reviewed, discussed, and approved in accordance with its charter the following:

Farm Credit West’s Quarterly Financial Reports to Shareholders for 2013 as well as the Annual Report to Shareholders for the year ended December 31, 2012.

Management’s quarterly certifications regarding Farm Credit West’s internal controls over financial reporting, as well as internal control testing results, consistent with the Sarbanes-Oxley Act as implemented by the Farm Credit System.

The results of the 2012 annual financial audit by PricewaterhouseCoopers LLP, Farm Credit West’s independent auditors.

Discussions with PricewaterhouseCoopers to: 1) confirm their independence from Farm Credit West; 2) engage PricewaterhouseCoopers to perform the 2013 annual financial audit and to issue a report thereon in accordance with generally accepted auditing standards, and; 3) receive reports regarding the scope, timing and performance of the financial audit.

Discussions with PricewaterhouseCoopers of matters as required by Statement on Auditing Standards No. 114 (“The Auditor’s Communication with Those Charged with Governance”). Both PricewaterhouseCoopers and Farm Credit West’s Director of Internal Audit provide reports directly to the Committee on significant matters.

The results of the 2013 Internal Fiscal and Operations Audit, Internal Credit Review and Internal Information Technology Review; the results of staff “exit” interviews as directed by the Committee and the Association’s internal controls.

Based on the foregoing review and discussions and relying thereon, the Committee recommended that the Board of Directors include the Audited Financial Statements in the Association’s Annual Report to Shareholders for the year ended December 31, 2013.

Barry T. Powell

Chairman of the Audit Committee

March 10, 2014

Audit Committee Members Barry T. Powell, Chairman Richard J. Enns, Vice Chairman Robert N. Hansen Thomas R. Heenan


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During 2013, the Farm Credit West Audit Committee (the Committee) met seven times to fulfill its responsibilities. The Committee’s responsibilities include monitoring and overseeing the financial reporting process. In this context, the Committee reviewed, discussed, and approved in accordance with its charter the following:

Farm Credit West’s Quarterly Financial Reports to Shareholders for 2013 as well as the Annual Report to Shareholders for the year ended December 31, 2012.

Management’s quarterly certifications regarding Farm Credit West’s internal controls over financial reporting, as well as internal control testing results, consistent with the Sarbanes-Oxley Act as implemented by the Farm Credit System.

The results of the 2012 annual financial audit by PricewaterhouseCoopers LLP, Farm Credit West’s independent auditors.

Discussions with PricewaterhouseCoopers to: 1) confirm their independence from Farm Credit West; 2) engage PricewaterhouseCoopers to perform the 2013 annual financial audit and to issue a report thereon in accordance with generally accepted auditing standards, and; 3) receive reports regarding the scope, timing and performance of the financial audit.

Discussions with PricewaterhouseCoopers of matters as required by Statement on Auditing Standards No. 114 (“The Auditor’s Communication with Those Charged with Governance”). Both PricewaterhouseCoopers and Farm Credit West’s Director of Internal Audit provide reports directly to the Committee on significant matters.

The results of the 2013 Internal Fiscal and Operations Audit, Internal Credit Review and Internal Information Technology Review; the results of staff “exit” interviews as directed by the Committee and the Association’s internal controls.

Based on the foregoing review and discussions and relying thereon, the Committee recommended that the Board of Directors include the Audited Financial Statements in the Association’s Annual Report to Shareholders for the year ended December 31, 2013.

Barry T. Powell

Chairman of the Audit Committee

March 10, 2014

Audit Committee Members Barry T. Powell, Chairman Richard J. Enns, Vice Chairman Robert N. Hansen Thomas R. Heenan


Consolidated Statement of Comprehensive Income

For the year ended December 31, (in thousands) 2013 2012 2011

Interest Income

Loans and leases 240,795$ 235,468$ 239,187$ Investment securities 8,498 10,266 12,509 Total interest income 249,293 245,734 251,696

Interest Expense

Note payable to CoBank/AgBank and other 66,784 76,199 89,172 Future payment funds 3,558 3,261 2,175 Total interest expense 70,342 79,460 91,347

Net interest income 178,951 166,274 160,349

Provision for loan losses (12,406) (16,046) (22,975)

Net interest income after provision for loan losses 166,545 150,228 137,374

Noninterest Income

Patronage income 29,200 28,595 43,299 AgBank recapitalization distribution — — 34,006 Loan and other fees 8,966 9,413 6,842 Farm Credit Insurance Fund distribution — 6,232 — Loan servicing income 3,820 4,420 4,731 Other noninterest (expense) income (1,632) 746 1,385 Total noninterest income 40,354 49,406 90,263

Noninterest Expense

Salaries and employee benefits 30,175 26,685 24,304 Information technology services 4,495 4,894 4,686 Occupancy and equipment 3,276 2,754 2,564 Farm Credit Insurance Fund premiums 4,746 2,402 3,140 Supervisory and examination expense 1,405 1,465 1,458 Other operating expense 7,378 6,579 6,497 (Gain) loss on other property owned, net (1,159) 3,249 8,817 Total noninterest expense 50,316 48,028 51,466

Income before income taxes 156,583 151,606 176,171 (Provision for) benefit from income taxes (129) (134) 678

Net income 156,454$ 151,472$ 176,849$

Other Comprehensive Income

Unrealized loss on investment securities — available-for-sale (1,077) (1,334) (267) Pension Restoration Plan adjustment 53 (915) 571

Total comprehensive income 155,430$ 149,223$ 177,153$

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheet


Assets

Loans and leases 6,414,566$ 6,078,186$ 5,655,766$ Less: allowance for loan and lease losses (34,700) (33,200) (29,600) Net loans and leases 6,379,866 6,044,986 5,626,166

Cash — 35,878 — Accrued interest receivable 50,708 52,146 56,561 Investment securities — available-for-sale 150,673 171,442 202,944 Investment securities — held-to-maturity 49,515 59,484 68,612 Investment in CoBank/AgBank 209,447 208,005 205,888 Other property owned 9,634 28,974 64,140 Premises and equipment, net 21,658 13,445 11,808 Other assets 54,430 54,153 46,541 Total assets 6,925,931$ 6,668,513$ 6,282,660$

Liabilities

Note payable to CoBank/AgBank 5,108,955$ 5,051,003$ 4,832,214$ Future payment funds 351,508 332,000 257,165 Accrued interest payable 5,638 6,048 7,043 Patronage distribution payable 53,000 51,000 33,000 Unfunded disbursements 3,193 — 19,290 Other liabilities 23,734 19,760 19,529 Total liabilities 5,546,028 5,459,811 5,168,241

Commitments and contingent liabilities (Note 15)

Members' Equity

Preferred stock 271,438 198,336 198,336 Capital stock and participation certificates 3,978 3,847 3,816 Unallocated retained earnings 1,101,448 1,002,456 905,955 Accumulated other comprehensive income 3,039 4,063 6,312 Total members' equity 1,379,903 1,208,702 1,114,419 Total liabilities and members' equity 6,925,931$ 6,668,513$ 6,282,660$



Consolidated Statement of Comprehensive Income


Interest Income

Loans and leases 240,795$ 235,468$ 239,187$ Investment securities 8,498 10,266 12,509 Total interest income 249,293 245,734 251,696

Interest Expense

Note payable to CoBank/AgBank and other 66,784 76,199 89,172 Future payment funds 3,558 3,261 2,175 Total interest expense 70,342 79,460 91,347

Net interest income 178,951 166,274 160,349

Provision for loan losses (12,406) (16,046) (22,975)

Net interest income after provision for loan losses 166,545 150,228 137,374

Noninterest Income

Patronage income 29,200 28,595 43,299 AgBank recapitalization distribution — — 34,006 Loan and other fees 8,966 9,413 6,842 Farm Credit Insurance Fund distribution — 6,232 — Loan servicing income 3,820 4,420 4,731 Other noninterest (expense) income (1,632) 746 1,385 Total noninterest income 40,354 49,406 90,263

Noninterest Expense

Salaries and employee benefits 30,175 26,685 24,304 Information technology services 4,495 4,894 4,686 Occupancy and equipment 3,276 2,754 2,564 Farm Credit Insurance Fund premiums 4,746 2,402 3,140 Supervisory and examination expense 1,405 1,465 1,458 Other operating expense 7,378 6,579 6,497 (Gain) loss on other property owned, net (1,159) 3,249 8,817 Total noninterest expense 50,316 48,028 51,466

Income before income taxes 156,583 151,606 176,171 (Provision for) benefit from income taxes (129) (134) 678

Net income 156,454$ 151,472$ 176,849$

Other Comprehensive Income

Unrealized loss on investment securities — available-for-sale (1,077) (1,334) (267) Pension Restoration Plan adjustment 53 (915) 571

Total comprehensive income 155,430$ 149,223$ 177,153$


Consolidated Balance Sheet


Assets

Loans and leases 6,414,566$ 6,078,186$ 5,655,766$ Less: allowance for loan and lease losses (34,700) (33,200) (29,600) Net loans and leases 6,379,866 6,044,986 5,626,166

Cash — 35,878 — Accrued interest receivable 50,708 52,146 56,561 Investment securities — available-for-sale 150,673 171,442 202,944 Investment securities — held-to-maturity 49,515 59,484 68,612 Investment in CoBank/AgBank 209,447 208,005 205,888 Other property owned 9,634 28,974 64,140 Premises and equipment, net 21,658 13,445 11,808 Other assets 54,430 54,153 46,541 Total assets 6,925,931$ 6,668,513$ 6,282,660$

Liabilities

Note payable to CoBank/AgBank 5,108,955$ 5,051,003$ 4,832,214$ Future payment funds 351,508 332,000 257,165 Accrued interest payable 5,638 6,048 7,043 Patronage distribution payable 53,000 51,000 33,000 Unfunded disbursements 3,193 — 19,290 Other liabilities 23,734 19,760 19,529 Total liabilities 5,546,028 5,459,811 5,168,241

Commitments and contingent liabilities (Note 15)

Members' Equity

Preferred stock 271,438 198,336 198,336 Capital stock and participation certificates 3,978 3,847 3,816 Unallocated retained earnings 1,101,448 1,002,456 905,955 Accumulated other comprehensive income 3,039 4,063 6,312 Total members' equity 1,379,903 1,208,702 1,114,419 Total liabilities and members' equity 6,925,931$ 6,668,513$ 6,282,660$



Consolidated Statement of Cash Flows


Cash Flows from Operating Activities:

Net income 156,454$ 151,472$ 176,849$ Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 12,406 16,046 22,975 Depreciation and amortization / accretion 1,776 1,471 1,316 (Gain) loss on other property owned, net (1,358) 3,197 7,917 AgBank recapitalization distribution — — (34,006) Decrease in accrued interest receivable 1,438 4,415 672 Increase in patronage receivable (2,365) (10,367) (16,363) Decrease in other assets 646 638 1,636 Decrease in accrued interest payable (410) (995) (1,121) Decrease in deferred tax liabilities — — (753) Increase (decrease) in other liabilities 4,027 (684) 3,277

Net cash provided by operating activities 172,614 165,193 162,399

Cash Flows from Investing Activities:

Increase in loans and investment securities, net (306,933) (396,685) (137,991) Recoveries of loans charged off 674 277 211 Proceeds from sale of premises and equipment 75 183 159 Acquisition of premises and equipment, net (10,064) (3,291) (2,049) Proceeds from sale of other property owned 13,253 12,233 4,381 Net (receipts) advances on other property owned (728) 1,284 5,754

Net cash used in investing activities (303,723) (385,999) (129,535)

Cash Flows from Financing Activities:

Net draw (repayment) on note payable to CoBank/AgBank 57,952 218,789 (129,584) Increase (decrease) in future payment funds 19,508 74,835 115,689 Net issuances (retirements) of preferred stock 68,640 (3,971) 13,083 Net issuances (retirements) of capital stock and participation certificates 131 31 (52) Cash patronage distribution paid (51,000) (33,000) (32,000)

Net cash provided by (used in) financing activities 95,231 256,684 (32,864)

Net increase in cash (35,878) 35,878 — Cash at beginning of year 35,878 — —

Cash at end of year —$ 35,878$ —$


Consolidated Statement of Changes in Members' Equity

Capital AccumulatedStock and Unallocated Other Total

Preferred Participation Retained Comprehensive Members'(in thousands) Stock Certificates Earnings Income Equity

Balance at December 31, 2010 180,509$ 3,868$ 766,850$ 6,008$ 957,235$

Comprehensive income 176,849 304 177,153 Preferred stock issued 99,626 99,626 Preferred stock retired (86,543) (86,543) Capital stock and participation certificates issued 201 201 Capital stock and participation certificates retired (253) (253) Preferred stock dividends declared and paid 4,744 (4,744) — Cash patronage distribution declared (33,000) (33,000) Balance at December 31, 2011 198,336 3,816 905,955 6,312 1,114,419

Comprehensive income 151,472 (2,249) 149,223 Preferred stock issued 64,022 64,022 Preferred stock retired (67,993) (67,993) Capital stock and participation certificates issued 249 249 Capital stock and participation certificates retired (218) (218) Preferred stock dividends declared and paid 3,971 (3,971) — Cash patronage distribution declared (51,000) (51,000) Balance at December 31, 2012 198,336 3,847 1,002,456 4,063 1,208,702

Comprehensive income 156,454 (1,024) 155,430 Preferred stock issued 152,884 152,884 Preferred stock retired (84,244) (84,244) Capital stock and participation certificates issued 334 334 Capital stock and participation certificates retired (203) (203) Preferred stock dividends declared and paid 4,462 (4,462) — Cash patronage distribution declared (53,000) (53,000) Balance at December 31, 2013 271,438$ 3,978$ 1,101,448$ 3,039$ 1,379,903$



Consolidated Statement of Cash Flows


Cash Flows from Operating Activities:

Net income 156,454$ 151,472$ 176,849$ Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 12,406 16,046 22,975 Depreciation and amortization / accretion 1,776 1,471 1,316 (Gain) loss on other property owned, net (1,358) 3,197 7,917 AgBank recapitalization distribution — — (34,006) Decrease in accrued interest receivable 1,438 4,415 672 Increase in patronage receivable (2,365) (10,367) (16,363) Decrease in other assets 646 638 1,636 Decrease in accrued interest payable (410) (995) (1,121) Decrease in deferred tax liabilities — — (753) Increase (decrease) in other liabilities 4,027 (684) 3,277

Net cash provided by operating activities 172,614 165,193 162,399

Cash Flows from Investing Activities:

Increase in loans and investment securities, net (306,933) (396,685) (137,991) Recoveries of loans charged off 674 277 211 Proceeds from sale of premises and equipment 75 183 159 Acquisition of premises and equipment, net (10,064) (3,291) (2,049) Proceeds from sale of other property owned 13,253 12,233 4,381 Net (receipts) advances on other property owned (728) 1,284 5,754

Net cash used in investing activities (303,723) (385,999) (129,535)

Cash Flows from Financing Activities:

Net draw (repayment) on note payable to CoBank/AgBank 57,952 218,789 (129,584) Increase (decrease) in future payment funds 19,508 74,835 115,689 Net issuances (retirements) of preferred stock 68,640 (3,971) 13,083 Net issuances (retirements) of capital stock and participation certificates 131 31 (52) Cash patronage distribution paid (51,000) (33,000) (32,000)

Net cash provided by (used in) financing activities 95,231 256,684 (32,864)

Net increase in cash (35,878) 35,878 — Cash at beginning of year 35,878 — —

Cash at end of year —$ 35,878$ —$


Consolidated Statement of Changes in Members' Equity

Capital AccumulatedStock and Unallocated Other Total

Preferred Participation Retained Comprehensive Members'(in thousands) Stock Certificates Earnings Income Equity

Balance at December 31, 2010 180,509$ 3,868$ 766,850$ 6,008$ 957,235$

Comprehensive income 176,849 304 177,153 Preferred stock issued 99,626 99,626 Preferred stock retired (86,543) (86,543) Capital stock and participation certificates issued 201 201 Capital stock and participation certificates retired (253) (253) Preferred stock dividends declared and paid 4,744 (4,744) — Cash patronage distribution declared (33,000) (33,000) Balance at December 31, 2011 198,336 3,816 905,955 6,312 1,114,419

Comprehensive income 151,472 (2,249) 149,223 Preferred stock issued 64,022 64,022 Preferred stock retired (67,993) (67,993) Capital stock and participation certificates issued 249 249 Capital stock and participation certificates retired (218) (218) Preferred stock dividends declared and paid 3,971 (3,971) — Cash patronage distribution declared (51,000) (51,000) Balance at December 31, 2012 198,336 3,847 1,002,456 4,063 1,208,702

Comprehensive income 156,454 (1,024) 155,430 Preferred stock issued 152,884 152,884 Preferred stock retired (84,244) (84,244) Capital stock and participation certificates issued 334 334 Capital stock and participation certificates retired (203) (203) Preferred stock dividends declared and paid 4,462 (4,462) — Cash patronage distribution declared (53,000) (53,000) Balance at December 31, 2013 271,438$ 3,978$ 1,101,448$ 3,039$ 1,379,903$



Notes to Consolidated Financial Statements

Note 1 – Organization and Operations

Organization

Farm Credit West, ACA and its subsidiaries, Farm Credit West, FLCA and Farm Credit West, PCA, (collectively, Farm Credit West or the Association) are member-owned cooperatives which provide credit and credit-related services to and for the benefit of eligible borrowers/shareholders for qualified agricultural purposes in its chartered territory. Farm Credit West’s chartered territory includes the California counties of El Dorado, Inyo, Kern, Kings, Mono, Nevada, Placer, Sacramento, San Luis Obispo, Santa Barbara, Solano, Sutter, Tulare, Ventura, Yolo, and Yuba as well as portions of Butte and Los Angeles counties. In the state of Nevada, the chartered territory includes Esmeralda county and portions of Mineral, Nye, and Clark counties.

Farm Credit West is a lending institution of the Farm Credit System (System), a nationwide system of cooperatively-owned banks and associations, which was established by Acts of Congress to meet the credit needs of American agriculture and is subject to the provisions of the Farm Credit Act of 1971, as amended (the Farm Credit Act). At December 31, 2013, the System was comprised of four system Banks and 82 affiliated associations. Each system bank serves one or more Production Credit Associations (PCAs), Federal Land Credit Associations (FLCAs), and/or Agricultural Credit Associations (ACAs). PCAs, FLCAs and ACAs are collectively referred to as Associations.

Effective January 1, 2012, U.S. AgBank, FCB (AgBank) merged with and into CoBank, FCB, a wholly owned subsidiary of CoBank, ACB. As a result of the merger, CoBank became the funding bank of Farm Credit West beginning January 1, 2012.

CoBank, its affiliated associations, and AgVantis, Inc. are collectively referred to as the District. CoBank provides the funding to associations within the District and is responsible for supervising certain activities of the District associations. AgVantis, Inc. which is owned by the entities it serves, provides technology and other operational services to certain associations and to CoBank; however, it does not serve Farm Credit West. As of December 31, 2013, the CoBank District consisted of CoBank, 27 ACAs which each have two wholly-owned subsidiaries (a FLCA and a PCA), two FLCAs, and AgVantis, Inc.

ACA parent companies provide financing and related services to customers through their FLCA and PCA subsidiaries. Generally, FLCAs make long-term loans secured by agricultural real estate or rural homes. PCAs make short- and intermediate-term loans for agricultural production or operating purposes.

Congress has delegated authority to the Farm Credit Administration (FCA) to regulate System banks and associations. The FCA examines the activities of System

institutions to ensure their compliance with the Farm Credit Act, FCA regulations and safe and sound banking practices.

The Farm Credit Act established the Farm Credit System Insurance Corporation (Insurance Corporation) to administer the Farm Credit Insurance Fund (Insurance Fund). By law, the Insurance Fund is required to be used (1) to ensure the timely payment of principal and interest on Systemwide debt obligations (Insured Debt), (2) to ensure the retirement of protected stock at par or stated value, and (3) for other specified purposes. The Insurance Fund is also available for discretionary use by the Insurance Corporation in providing assistance to certain troubled System institutions and to cover the operating expenses of the Insurance Corporation. Each System bank is required to pay premiums, which may be passed on to the Associations, into the Insurance Fund based on its pro rata share of Insured Debt outstanding until the assets in the Insurance Fund reach the “secure base amount.” The secure base amount is defined in the Farm Credit Act as two percent of the aggregate Insured Debt or such other percentage of the Insured Debt as the Insurance Corporation, in its sole discretion, determines to be actuarially sound. When the amount in the Insurance Fund exceeds the secure base amount, the Insurance Corporation is required to reduce premiums to maintain the Insurance Fund at the two percent level. As required by the Farm Credit Act, as amended, the Insurance Corporation may return excess funds above the secure base amount to System institutions. CoBank passes this premium expense and the return of excess funds as applicable through to the Association based on the annual average adjusted balance of Farm Credit West’s direct note payable with the bank.

Operations

The Farm Credit Act sets forth the types of authorized lending activity, persons eligible to borrow from Farm Credit West, and financial services which can be provided by Farm Credit West. Farm Credit West is authorized to provide, either directly or in participation with other lenders, credit, credit commitments, and related services to eligible borrowers. Eligible borrowers include farmers, ranchers, producers or harvesters of aquatic products, their cooperatives, farm-related businesses, and certain ag product processors/marketers. Farm Credit West also offers appraisal services and credit life insurance to its borrowers as additional services.

Farm Credit West’s financial condition may be impacted by factors affecting CoBank. The CoBank Annual Report is available free of charge on CoBank’s web site, www.cobank.com. Or upon request, shareholders of Farm Credit West will be provided with a copy of the CoBank Annual Report at no charge, which includes the unaudited condensed combined balance sheet and income statement of CoBank and its affiliated associations, and AgVantis, Inc. The CoBank Annual Report discusses the material aspects of

Consolidated Statement of Cash Flows (continued)


Supplemental Cash Flow Information

Cash paid during the year for: Interest 70,752$ 80,455$ 92,468$ Income taxes 205 9 16

Supplemental Schedule of Noncash Investing and Financing Activities

Decrease in loans due to acquisition of other property owned 4,827$ 5,109$ 17,008$ Increase in loans due to financed sales of other property owned 13,000 23,561 17,643 Decrease in loans and allowance for loan losses from charge-offs 11,580 12,723 17,786 Other comprehensive (loss) income (1,024) (2,249) 304 Cash patronage distributions payable 53,000 51,000 33,000 Preferred stock dividends declared 4,462 3,971 4,744 Patronage stock received from CoBank 1,442 2,117 1,946




Note 1 – Organization and Operations

Organization

Farm Credit West, ACA and its subsidiaries, Farm Credit West, FLCA and Farm Credit West, PCA, (collectively, Farm Credit West or the Association) are member-owned cooperatives which provide credit and credit-related services to and for the benefit of eligible borrowers/shareholders for qualified agricultural purposes in its chartered territory. Farm Credit West’s chartered territory includes the California counties of El Dorado, Inyo, Kern, Kings, Mono, Nevada, Placer, Sacramento, San Luis Obispo, Santa Barbara, Solano, Sutter, Tulare, Ventura, Yolo, and Yuba as well as portions of Butte and Los Angeles counties. In the state of Nevada, the chartered territory includes Esmeralda county and portions of Mineral, Nye, and Clark counties.

Farm Credit West is a lending institution of the Farm Credit System (System), a nationwide system of cooperatively-owned banks and associations, which was established by Acts of Congress to meet the credit needs of American agriculture and is subject to the provisions of the Farm Credit Act of 1971, as amended (the Farm Credit Act). At December 31, 2013, the System was comprised of four system Banks and 82 affiliated associations. Each system bank serves one or more Production Credit Associations (PCAs), Federal Land Credit Associations (FLCAs), and/or Agricultural Credit Associations (ACAs). PCAs, FLCAs and ACAs are collectively referred to as Associations.

Effective January 1, 2012, U.S. AgBank, FCB (AgBank) merged with and into CoBank, FCB, a wholly owned subsidiary of CoBank, ACB. As a result of the merger, CoBank became the funding bank of Farm Credit West beginning January 1, 2012.

CoBank, its affiliated associations, and AgVantis, Inc. are collectively referred to as the District. CoBank provides the funding to associations within the District and is responsible for supervising certain activities of the District associations. AgVantis, Inc. which is owned by the entities it serves, provides technology and other operational services to certain associations and to CoBank; however, it does not serve Farm Credit West. As of December 31, 2013, the CoBank District consisted of CoBank, 27 ACAs which each have two wholly-owned subsidiaries (a FLCA and a PCA), two FLCAs, and AgVantis, Inc.

ACA parent companies provide financing and related services to customers through their FLCA and PCA subsidiaries. Generally, FLCAs make long-term loans secured by agricultural real estate or rural homes. PCAs make short- and intermediate-term loans for agricultural production or operating purposes.

Congress has delegated authority to the Farm Credit Administration (FCA) to regulate System banks and associations. The FCA examines the activities of System

institutions to ensure their compliance with the Farm Credit Act, FCA regulations and safe and sound banking practices.

The Farm Credit Act established the Farm Credit System Insurance Corporation (Insurance Corporation) to administer the Farm Credit Insurance Fund (Insurance Fund). By law, the Insurance Fund is required to be used (1) to ensure the timely payment of principal and interest on Systemwide debt obligations (Insured Debt), (2) to ensure the retirement of protected stock at par or stated value, and (3) for other specified purposes. The Insurance Fund is also available for discretionary use by the Insurance Corporation in providing assistance to certain troubled System institutions and to cover the operating expenses of the Insurance Corporation. Each System bank is required to pay premiums, which may be passed on to the Associations, into the Insurance Fund based on its pro rata share of Insured Debt outstanding until the assets in the Insurance Fund reach the “secure base amount.” The secure base amount is defined in the Farm Credit Act as two percent of the aggregate Insured Debt or such other percentage of the Insured Debt as the Insurance Corporation, in its sole discretion, determines to be actuarially sound. When the amount in the Insurance Fund exceeds the secure base amount, the Insurance Corporation is required to reduce premiums to maintain the Insurance Fund at the two percent level. As required by the Farm Credit Act, as amended, the Insurance Corporation may return excess funds above the secure base amount to System institutions. CoBank passes this premium expense and the return of excess funds as applicable through to the Association based on the annual average adjusted balance of Farm Credit West’s direct note payable with the bank.

Operations

The Farm Credit Act sets forth the types of authorized lending activity, persons eligible to borrow from Farm Credit West, and financial services which can be provided by Farm Credit West. Farm Credit West is authorized to provide, either directly or in participation with other lenders, credit, credit commitments, and related services to eligible borrowers. Eligible borrowers include farmers, ranchers, producers or harvesters of aquatic products, their cooperatives, farm-related businesses, and certain ag product processors/marketers. Farm Credit West also offers appraisal services and credit life insurance to its borrowers as additional services.

Farm Credit West’s financial condition may be impacted by factors affecting CoBank. The CoBank Annual Report is available free of charge on CoBank’s web site, www.cobank.com. Or upon request, shareholders of Farm Credit West will be provided with a copy of the CoBank Annual Report at no charge, which includes the unaudited condensed combined balance sheet and income statement of CoBank and its affiliated associations, and AgVantis, Inc. The CoBank Annual Report discusses the material aspects of

Consolidated Statement of Cash Flows (continued)


Supplemental Cash Flow Information

Cash paid during the year for: Interest 70,752$ 80,455$ 92,468$ Income taxes 205 9 16

Supplemental Schedule of Noncash Investing and Financing Activities

Decrease in loans due to acquisition of other property owned 4,827$ 5,109$ 17,008$ Increase in loans due to financed sales of other property owned 13,000 23,561 17,643 Decrease in loans and allowance for loan losses from charge-offs 11,580 12,723 17,786 Other comprehensive (loss) income (1,024) (2,249) 304 Cash patronage distributions payable 53,000 51,000 33,000 Preferred stock dividends declared 4,462 3,971 4,744 Patronage stock received from CoBank 1,442 2,117 1,946




and estimable losses inherent in the loan portfolio. The allowance is increased through provisions for loan losses and loan recoveries and is decreased through reversals of provisions for loan losses and loan charge-offs.

The level of the allowance is generally based on recent charge-off experience adjusted for relevant factors. The allowance is based on a periodic evaluation of changes in the following factors when adjusting the historical charge-off experience: loan portfolio composition, credit risk classifications, collateral values, risk concentrations, weather related conditions, and economic conditions. It is based on estimates, appraisals and evaluations of loans which, by their nature, contain elements of uncertainty and imprecision. The possibility exists that changes in the economy and its impact on borrower repayment capacity will cause these estimates, appraisals, and evaluations to change.

The allowance for loan losses includes components for loans individually evaluated for impairment and loans collectively evaluated for impairment. Generally, for loans individually evaluated, the allowance for loan losses represents the difference between the recorded investment in the loan and the fair value of the collateral, if the loan is collateral dependent. For those loans collectively evaluated for impairment, the allowance for loan losses is determined using the risk rating methodology.

Cash

Cash, as included in the consolidated financial statements, represents cash on deposit at financial institutions.

Investment Securities

Farm Credit West, as permitted under System regulations, holds investments to manage risk concentrations. Investments for which the Association has the intent and ability to hold to maturity are classified as investments held-to-maturity and are carried at amortized cost. Investments for which Farm Credit West may not necessarily intend to hold to maturity are classified and accounted for as available-for-sale. These investments are reported at fair value with net unrealized gains and losses reported as a separate component of members' equity (accumulated other comprehensive income) in the Consolidated Balance Sheet. Changes in the fair value of investments classified as available-for-sale are reflected as direct charges or credits to other comprehensive income. If an investment is deemed to be other-than-temporarily impaired, the cost basis of the investment is written down to its fair value, the credit-related loss is recognized through earnings and the non-credit related portion is recognized in other comprehensive income in the period of impairment.

Investment in CoBank/AgBank

The Association’s required investment in CoBank is in the form of Class A Stock. The minimum required investment is

4.00% of the prior year’s average direct note volume. The investment in CoBank is comprised of patronage-based stockand purchased stock.

Prior to the AgBank merger with CoBank on January 1, 2012, the Association’s investment in AgBank was in the form of Class A Stock. The minimum required investment in AgBank was 5.00% of average direct note volume, net of any excess investment. The required investment was comprisedof AgBank retained earnings attributed to the Association, patronage-based stock, and purchased stock. On the date of the merger, AgBank stock was converted to CoBank stock.

Other Property Owned

Other property owned, consisting of real and personal property acquired through a collection action, are recorded at fair value less estimated selling costs upon acquisition. Any initial reduction in the carrying amount of a loan to the fair value of the collateral received is charged to the allowance for loan losses. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Income and expenses from operations and carrying value adjustments are included in loss on other property owned, net in the Consolidated Statement of Comprehensive Income. Farm Credit West may, on occasion, finance dispositions of other property owned. These loans or sales contracts are made on the same terms as those prevailing at the time for comparable transactions.

Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets. Gains and losses on dispositions are reflected in current operating results. Maintenance and repairs are expensed and improvements are capitalized.

Other Assets and Other Liabilities

Other assets are comprised primarily of patronage receivable, accounts receivable, mortgage servicing rights, and investment in Farm Credit institutions other than CoBank.Significant components of other liabilities include Insurance Fund premiums payable, benefits payable, accrued liability for the Pension Restoration Plan, and accounts payable.

Future Payment Funds

Farm Credit West is authorized under the Farm Credit Act to accept payments in advance from borrowers. Such payments are presented as liabilities in the accompanying Consolidated Balance Sheet. Future payment funds are not insured. Farm Credit West pays interest on such accounts.


CoBank’s and the District’s financial condition, changes in financial condition, and results of operations.

Note 2 – Summary of Significant Accounting Policies

The accounting and reporting policies of Farm Credit West conform with accounting principles generally accepted in the United States of America (GAAP) and prevailing practices within the banking industry. The preparation of financial statements in conformity with GAAP requires Association management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates. Significant estimates are discussed in these footnotes, as applicable.

The consolidated financial statements include the accounts of Farm Credit West, ACA and its wholly-owned subsidiaries, Farm Credit West, FLCA and Farm Credit West, PCA. All significant intercompany transactions have been eliminated in consolidation.

Loans and Allowance for Loan Losses

Long-term real estate mortgage loans generally have maturities ranging from five to 40 years. Substantially all short- and intermediate-term loans for agricultural production or operating purposes have maturities of ten years or less. Loans are carried at their principal amount outstanding less unearned income. Interest on loans is accrued and credited to interest income based upon the daily principal amount outstanding.

Impaired loans are loans for which it is probable that not all principal and interest will be collected according to the contractual terms of the loan. Impaired loans include nonaccrual loans, restructured loans, and loans past due 90 days or more and still accruing interest. A loan is considered contractually past due when any principal repayment or interest payment required by the loan contract is not received on or before the due date. A loan remains contractually past due until it is formally restructured or until the entire amount past due, including principal and accrued interest, is collected in full or otherwise discharged.

Impaired loans are generally placed in nonaccrual status when principal or interest is delinquent for 90 days or more (unless adequately collateralized and in the process of collection) or when circumstances indicate that collection of principal and/or interest is in doubt. When a loan is placed in nonaccrual status, accrued interest deemed uncollectible is reversed from current year income (if accrued in the current year) and/or included in the nonaccrual balance (if accrued in prior years). Loans are charged-off at the time they are determined to be uncollectible.

A restructured loan constitutes a troubled debt restructuring if, for economic or legal reasons related to the debtor’s

financial difficulties, the Association grants a concession to the debtor that it would not otherwise consider.

When loans are in nonaccrual status, loan payments are generally applied against the recorded nonaccrual balance. A nonaccrual loan may, at times, be maintained on a cash basis. As a cash basis nonaccrual loan, the recognition of interest income from cash payments received is allowed when the collectability of the recorded investment in the loan is fully expected and when the loan does not have a remaining unrecovered charge-off associated with it. Nonaccrual loans may be returned to accrual status when principal and interest are current, the borrower has demonstrated payment performance, there are no unrecovered prior charge-offs and collection of future payments is fully expected. If previously unrecognized interest income exists at the time the loan is transferred to accrual status, cash received at the time of or subsequent to the transfer is first recorded as interest income until such time as the recorded balance equals the contractual indebtedness of the borrower.

Financial Accounting Standards Board guidance requires loan origination fees and direct loan origination costs, if material, to be capitalized and the net fee or cost to be amortized over the life of the related loan as an adjustment to yield. We have not implemented this guidance because the effects were not material to our financial position or results of operations for any year included in these consolidated financial statements.

The Association purchases loan participations from other System and non-System entities to generate additional earnings and diversify risk related to existing commodities financed and the geographic area served. Additionally, the Association sells a portion of certain large loans to other System and non-System entities to reduce risk and comply with established lending limits. Loans are accounted for following the accounting requirements for sale treatment.

The Association uses a two-dimensional loan rating model that incorporates a 14-point risk rating scale to identify and track the probability of borrower default and a separate scale addressing loss given default over a period of time. Probability of default (PD) is the probability that a borrower will experience a default within 12 months from the date of the determination of the risk rating. A default is considered to have occurred if the lender believes the borrower will not be able to pay its obligation in full or the borrower is past due more than 90 days. The loss given default (LGD) is management’s estimate as to the anticipated economic loss on a specific loan assuming default has occurred or is expected to occur within the next 12 months.

The credit risk rating methodology (14-point risk rating scale) is a key component of the Association’s allowance for loan losses evaluation, and is incorporated into its loan underwriting standards and internal lending limit. The allowance for loan losses (allowance) is maintained at a level considered adequate by management to provide for probable



and estimable losses inherent in the loan portfolio. The allowance is increased through provisions for loan losses and loan recoveries and is decreased through reversals of provisions for loan losses and loan charge-offs.

The level of the allowance is generally based on recent charge-off experience adjusted for relevant factors. The allowance is based on a periodic evaluation of changes in the following factors when adjusting the historical charge-off experience: loan portfolio composition, credit risk classifications, collateral values, risk concentrations, weather related conditions, and economic conditions. It is based on estimates, appraisals and evaluations of loans which, by their nature, contain elements of uncertainty and imprecision. The possibility exists that changes in the economy and its impact on borrower repayment capacity will cause these estimates, appraisals, and evaluations to change.

The allowance for loan losses includes components for loans individually evaluated for impairment and loans collectively evaluated for impairment. Generally, for loans individually evaluated, the allowance for loan losses represents the difference between the recorded investment in the loan and the fair value of the collateral, if the loan is collateral dependent. For those loans collectively evaluated for impairment, the allowance for loan losses is determined using the risk rating methodology.

Cash

Cash, as included in the consolidated financial statements, represents cash on deposit at financial institutions.

Investment Securities

Farm Credit West, as permitted under System regulations, holds investments to manage risk concentrations. Investments for which the Association has the intent and ability to hold to maturity are classified as investments held-to-maturity and are carried at amortized cost. Investments for which Farm Credit West may not necessarily intend to hold to maturity are classified and accounted for as available-for-sale. These investments are reported at fair value with net unrealized gains and losses reported as a separate component of members' equity (accumulated other comprehensive income) in the Consolidated Balance Sheet. Changes in the fair value of investments classified as available-for-sale are reflected as direct charges or credits to other comprehensive income. If an investment is deemed to be other-than-temporarily impaired, the cost basis of the investment is written down to its fair value, the credit-related loss is recognized through earnings and the non-credit related portion is recognized in other comprehensive income in the period of impairment.

Investment in CoBank/AgBank

The Association’s required investment in CoBank is in the form of Class A Stock. The minimum required investment is

4.00% of the prior year’s average direct note volume. The investment in CoBank is comprised of patronage-based stockand purchased stock.

Prior to the AgBank merger with CoBank on January 1, 2012, the Association’s investment in AgBank was in the form of Class A Stock. The minimum required investment in AgBank was 5.00% of average direct note volume, net of any excess investment. The required investment was comprisedof AgBank retained earnings attributed to the Association, patronage-based stock, and purchased stock. On the date of the merger, AgBank stock was converted to CoBank stock.

Other Property Owned

Other property owned, consisting of real and personal property acquired through a collection action, are recorded at fair value less estimated selling costs upon acquisition. Any initial reduction in the carrying amount of a loan to the fair value of the collateral received is charged to the allowance for loan losses. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Income and expenses from operations and carrying value adjustments are included in loss on other property owned, net in the Consolidated Statement of Comprehensive Income. Farm Credit West may, on occasion, finance dispositions of other property owned. These loans or sales contracts are made on the same terms as those prevailing at the time for comparable transactions.

Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the assets. Gains and losses on dispositions are reflected in current operating results. Maintenance and repairs are expensed and improvements are capitalized.

Other Assets and Other Liabilities

Other assets are comprised primarily of patronage receivable, accounts receivable, mortgage servicing rights, and investment in Farm Credit institutions other than CoBank.Significant components of other liabilities include Insurance Fund premiums payable, benefits payable, accrued liability for the Pension Restoration Plan, and accounts payable.

Future Payment Funds

Farm Credit West is authorized under the Farm Credit Act to accept payments in advance from borrowers. Such payments are presented as liabilities in the accompanying Consolidated Balance Sheet. Future payment funds are not insured. Farm Credit West pays interest on such accounts.


CoBank’s and the District’s financial condition, changes in financial condition, and results of operations.

Note 2 – Summary of Significant Accounting Policies

The accounting and reporting policies of Farm Credit West conform with accounting principles generally accepted in the United States of America (GAAP) and prevailing practices within the banking industry. The preparation of financial statements in conformity with GAAP requires Association management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates. Significant estimates are discussed in these footnotes, as applicable.

The consolidated financial statements include the accounts of Farm Credit West, ACA and its wholly-owned subsidiaries, Farm Credit West, FLCA and Farm Credit West, PCA. All significant intercompany transactions have been eliminated in consolidation.

Loans and Allowance for Loan Losses

Long-term real estate mortgage loans generally have maturities ranging from five to 40 years. Substantially all short- and intermediate-term loans for agricultural production or operating purposes have maturities of ten years or less. Loans are carried at their principal amount outstanding less unearned income. Interest on loans is accrued and credited to interest income based upon the daily principal amount outstanding.

Impaired loans are loans for which it is probable that not all principal and interest will be collected according to the contractual terms of the loan. Impaired loans include nonaccrual loans, restructured loans, and loans past due 90 days or more and still accruing interest. A loan is considered contractually past due when any principal repayment or interest payment required by the loan contract is not received on or before the due date. A loan remains contractually past due until it is formally restructured or until the entire amount past due, including principal and accrued interest, is collected in full or otherwise discharged.

Impaired loans are generally placed in nonaccrual status when principal or interest is delinquent for 90 days or more (unless adequately collateralized and in the process of collection) or when circumstances indicate that collection of principal and/or interest is in doubt. When a loan is placed in nonaccrual status, accrued interest deemed uncollectible is reversed from current year income (if accrued in the current year) and/or included in the nonaccrual balance (if accrued in prior years). Loans are charged-off at the time they are determined to be uncollectible.

A restructured loan constitutes a troubled debt restructuring if, for economic or legal reasons related to the debtor’s

financial difficulties, the Association grants a concession to the debtor that it would not otherwise consider.

When loans are in nonaccrual status, loan payments are generally applied against the recorded nonaccrual balance. A nonaccrual loan may, at times, be maintained on a cash basis. As a cash basis nonaccrual loan, the recognition of interest income from cash payments received is allowed when the collectability of the recorded investment in the loan is fully expected and when the loan does not have a remaining unrecovered charge-off associated with it. Nonaccrual loans may be returned to accrual status when principal and interest are current, the borrower has demonstrated payment performance, there are no unrecovered prior charge-offs and collection of future payments is fully expected. If previously unrecognized interest income exists at the time the loan is transferred to accrual status, cash received at the time of or subsequent to the transfer is first recorded as interest income until such time as the recorded balance equals the contractual indebtedness of the borrower.

Financial Accounting Standards Board guidance requires loan origination fees and direct loan origination costs, if material, to be capitalized and the net fee or cost to be amortized over the life of the related loan as an adjustment to yield. We have not implemented this guidance because the effects were not material to our financial position or results of operations for any year included in these consolidated financial statements.

The Association purchases loan participations from other System and non-System entities to generate additional earnings and diversify risk related to existing commodities financed and the geographic area served. Additionally, the Association sells a portion of certain large loans to other System and non-System entities to reduce risk and comply with established lending limits. Loans are accounted for following the accounting requirements for sale treatment.

The Association uses a two-dimensional loan rating model that incorporates a 14-point risk rating scale to identify and track the probability of borrower default and a separate scale addressing loss given default over a period of time. Probability of default (PD) is the probability that a borrower will experience a default within 12 months from the date of the determination of the risk rating. A default is considered to have occurred if the lender believes the borrower will not be able to pay its obligation in full or the borrower is past due more than 90 days. The loss given default (LGD) is management’s estimate as to the anticipated economic loss on a specific loan assuming default has occurred or is expected to occur within the next 12 months.

The credit risk rating methodology (14-point risk rating scale) is a key component of the Association’s allowance for loan losses evaluation, and is incorporated into its loan underwriting standards and internal lending limit. The allowance for loan losses (allowance) is maintained at a level considered adequate by management to provide for probable



Unfunded Disbursements

By agreement with its clearing bank, Farm Credit West generally funds disbursements when checks issued by Farm Credit West are presented to the clearing bank for payment. At the 2013 and 2011 year-ends, Farm Credit West had checks outstanding that had not yet been presented to the clearing bank for payment. When such checks are subsequently presented to the clearing bank, they are typically funded by Farm Credit West through incoming cash receipts or direct note borrowings from CoBank.

Employee Benefit Plans

Substantially all Farm Credit West employees participate in the Eleventh District Defined Benefit Retirement Plan (Defined Benefit Plan) and/or the Farm Credit Foundations Defined Contribution/401(k) Plan (Defined Contribution Plan). The Defined Benefit Plan is a noncontributory plan. Benefits are based on compensation and years of service. Farm Credit West recognizes its proportional share of expense and contributes its proportional share of funding. The Defined Benefit Plan was closed to employees hired after December 31, 1997.

The Defined Contribution Plan has two components. Employees who do not participate in the Defined Benefit Plan may receive benefits through the Employer Contribution portion of the Defined Contribution Plan. In this plan, Farm Credit West provides a monthly contribution based on a defined percentage of the employee’s salary. Employees may also participate in a Salary Deferral Plan governed by Section 401(k) of the Internal Revenue Code. Farm Credit West matches a certain percentage of employee contributions. Employees hired after December 31, 1997 are eligible to participate only in the Defined Contribution Plan. All defined contribution costs are expensed in the same period that participants earn employer contributions.

Farm Credit West also participates in the Eleventh District nonqualified defined benefit Pension Restoration Plan. This plan provides retirement benefits above the Internal Revenue Code compensation limit to certain highly-compensated eligible employees. Benefits payable under this plan are partially offset by the benefits payable from the Defined Benefit Plan.

Farm Credit West provides certain health and life insurance benefits to eligible current and retired employees through the Farm Credit Foundations Retiree Medical Plan and Retiree Life Plan. The anticipated costs of these benefits are accrued during the period of the employee’s active service. The authoritative accounting guidance requires the accrual of the expected cost of providing postretirement benefits during the years that the employee renders services necessary to become eligible for these benefits.

Income Taxes

As previously described, Farm Credit West, ACA conducts its business activities through two wholly-owned subsidiaries. Long-term mortgage lending activities are conducted through a wholly-owned FLCA subsidiary which is exempt from federal and state income tax. Short- and intermediate-term lending activities are conducted through a wholly-owned PCA subsidiary. As with the PCA subsidiary, the ACA holding company is subject to income tax. Farm Credit West accounts for income taxes under the liability method. Accordingly, deferred taxes are recognized for estimated taxes ultimately payable or recoverable based on federal, state, or local laws. In return for a management fee, Farm Credit West, FLCA provides a variety of services to Farm Credit West, ACA and Farm Credit West, PCA under a management agreement. The management agreement, in effect, allocates operating expenses to each subsidiary based on estimated relative service.

Farm Credit West operates as a cooperative that qualifies for tax treatment under Subchapter T of the Internal Revenue Code. Accordingly, under specified conditions, Farm Credit West can exclude from taxable income amounts distributed as qualified patronage dividends in the form of cash, stock, or allocated retained earnings. Provisions for income taxes are made only on those taxable earnings that will not be distributed as qualified patronage dividends. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts reflected in the financial statements and tax bases of assets and liabilities. A valuation allowance is provided against deferred tax assets to the extent that it is more likely than not (over 50% probability), based on management's estimate, that the deferred tax assets will not be realized. The consideration of valuation allowances involves various estimates and assumptions as to future taxable earnings, including the effects of the Association’s expected patronage program, which reduces taxable earnings.

Deferred income taxes have not been provided on $53.4 million of patronage stock distributions received by Farm Credit West from AgBank prior to 2007. Such patronage allocations, distributed in the form of stock, are subject to tax only upon conversion to cash. Management’s intent is to permanently invest these and other undistributed earnings in CoBank (AgBank’s successor), or if converted to cash, to pass through any such earnings to Association borrowers through qualified patronage allocations.

On December 31, 2011, AgBank, in anticipation of its January 1, 2012 merger with CoBank, recapitalized and distributed stock to its Association members. Deferred taxes have not been provided on $34.0 million received by Farm Credit West on that stock distribution. Management’s intent, if that stock is ever converted to cash, is to pass through any related earnings to Association borrowers through qualified patronage allocations.


Additionally, deferred income taxes have not been provided on CoBank’s unallocated earnings.

The Association accounts for income taxes in accordance with ASC 740, which provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Association's tax returns to determine whether the tax positions are more-likely-than-not of being sustained upon examination by the applicable taxauthority, based on the technical merits of the tax position, and then measuring the tax benefit that is more-likely-than-not to be realized. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a taxexpense in the current reporting period.

For California tax purposes, Farm Credit West can exclude from taxable income all patronage-sourced income. Therefore, the provision for state income taxes is made only on non-patronage sourced earnings.

Patronage Distribution from CoBank

Effective January 1, 2012, patronage distributions from CoBank are accrued by the Association in the year earned.Prior to the bank merger, the Association historically recorded patronage distributions from AgBank upon the declaration and receipt of the distribution. Effective December 31, 2011, the Association accrued the AgBank patronage from its 2011 earnings as the distribution was declared. This resulted in the Association recognizing two years of patronage income from AgBank in 2011. The accrued 2011 patronage was paid by CoBank to the Association in March 2012.

Other Comprehensive Income (Loss)

Other comprehensive income/(loss) refers to revenue, expenses, gains, and losses that under generally accepted accounting principles are recorded as an element of members’ equity and comprehensive income but are excluded from net income. Farm Credit West records other comprehensive income/(loss) based on: (1) the market value of its investment securities available-for-sale; and, (2) the liability associated with the Pension Restoration Plan (described in Note 12).

Fair Value Measurement

Financial Accounting Standards Board (FASB) guidance defines fair value, establishes a framework for measuring fair value, and specifies disclosures about fair value measurements. It describes three levels of inputs that may be used to measure fair value.

Level 1: Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2: Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. Level 2 inputs include the following: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active so that they are traded less frequently than exchange-traded instruments, the prices are not current or principal market information is not released publicly; (c) inputs other than quoted prices that are observable such as interest rates and yield curves, prepayment speeds, credit risks and default rates and (d) inputs derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Unobservable inputs are those that are supported by little or no market activity and that are significant to the determination of fair value of the assets or liabilities. These unobservable inputs reflect the reporting entity’s own assumptions about factors that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.For Farm Credit West, Level 3 assets include investment securities – available-for-sale, certain impaired loans, and other property owned.

Fair value disclosures are presented in Note 16.

Recently Issued or Adopted Accounting Pronouncements

In February 2013, the FASB issued guidance, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” The guidance requires entities to present either parenthetically on the face of the financial statements or in the notes to the financial statements, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. For nonpublic entities, the guidance is effective for annual periods beginning after December 15, 2013. The adoption of this guidance did not impact the financial condition or results of operations, but did result in additional disclosures.



Unfunded Disbursements

By agreement with its clearing bank, Farm Credit West generally funds disbursements when checks issued by Farm Credit West are presented to the clearing bank for payment. At the 2013 and 2011 year-ends, Farm Credit West had checks outstanding that had not yet been presented to the clearing bank for payment. When such checks are subsequently presented to the clearing bank, they are typically funded by Farm Credit West through incoming cash receipts or direct note borrowings from CoBank.

Employee Benefit Plans

Substantially all Farm Credit West employees participate in the Eleventh District Defined Benefit Retirement Plan (Defined Benefit Plan) and/or the Farm Credit Foundations Defined Contribution/401(k) Plan (Defined Contribution Plan). The Defined Benefit Plan is a noncontributory plan. Benefits are based on compensation and years of service. Farm Credit West recognizes its proportional share of expense and contributes its proportional share of funding. The Defined Benefit Plan was closed to employees hired after December 31, 1997.

The Defined Contribution Plan has two components. Employees who do not participate in the Defined Benefit Plan may receive benefits through the Employer Contribution portion of the Defined Contribution Plan. In this plan, Farm Credit West provides a monthly contribution based on a defined percentage of the employee’s salary. Employees may also participate in a Salary Deferral Plan governed by Section 401(k) of the Internal Revenue Code. Farm Credit West matches a certain percentage of employee contributions. Employees hired after December 31, 1997 are eligible to participate only in the Defined Contribution Plan. All defined contribution costs are expensed in the same period that participants earn employer contributions.

Farm Credit West also participates in the Eleventh District nonqualified defined benefit Pension Restoration Plan. This plan provides retirement benefits above the Internal Revenue Code compensation limit to certain highly-compensated eligible employees. Benefits payable under this plan are partially offset by the benefits payable from the Defined Benefit Plan.

Farm Credit West provides certain health and life insurance benefits to eligible current and retired employees through the Farm Credit Foundations Retiree Medical Plan and Retiree Life Plan. The anticipated costs of these benefits are accrued during the period of the employee’s active service. The authoritative accounting guidance requires the accrual of the expected cost of providing postretirement benefits during the years that the employee renders services necessary to become eligible for these benefits.

Income Taxes

As previously described, Farm Credit West, ACA conducts its business activities through two wholly-owned subsidiaries. Long-term mortgage lending activities are conducted through a wholly-owned FLCA subsidiary which is exempt from federal and state income tax. Short- and intermediate-term lending activities are conducted through a wholly-owned PCA subsidiary. As with the PCA subsidiary, the ACA holding company is subject to income tax. Farm Credit West accounts for income taxes under the liability method. Accordingly, deferred taxes are recognized for estimated taxes ultimately payable or recoverable based on federal, state, or local laws. In return for a management fee, Farm Credit West, FLCA provides a variety of services to Farm Credit West, ACA and Farm Credit West, PCA under a management agreement. The management agreement, in effect, allocates operating expenses to each subsidiary based on estimated relative service.

Farm Credit West operates as a cooperative that qualifies for tax treatment under Subchapter T of the Internal Revenue Code. Accordingly, under specified conditions, Farm Credit West can exclude from taxable income amounts distributed as qualified patronage dividends in the form of cash, stock, or allocated retained earnings. Provisions for income taxes are made only on those taxable earnings that will not be distributed as qualified patronage dividends. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts reflected in the financial statements and tax bases of assets and liabilities. A valuation allowance is provided against deferred tax assets to the extent that it is more likely than not (over 50% probability), based on management's estimate, that the deferred tax assets will not be realized. The consideration of valuation allowances involves various estimates and assumptions as to future taxable earnings, including the effects of the Association’s expected patronage program, which reduces taxable earnings.

Deferred income taxes have not been provided on $53.4 million of patronage stock distributions received by Farm Credit West from AgBank prior to 2007. Such patronage allocations, distributed in the form of stock, are subject to tax only upon conversion to cash. Management’s intent is to permanently invest these and other undistributed earnings in CoBank (AgBank’s successor), or if converted to cash, to pass through any such earnings to Association borrowers through qualified patronage allocations.

On December 31, 2011, AgBank, in anticipation of its January 1, 2012 merger with CoBank, recapitalized and distributed stock to its Association members. Deferred taxes have not been provided on $34.0 million received by Farm Credit West on that stock distribution. Management’s intent, if that stock is ever converted to cash, is to pass through any related earnings to Association borrowers through qualified patronage allocations.


Additionally, deferred income taxes have not been provided on CoBank’s unallocated earnings.

The Association accounts for income taxes in accordance with ASC 740, which provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Association's tax returns to determine whether the tax positions are more-likely-than-not of being sustained upon examination by the applicable taxauthority, based on the technical merits of the tax position, and then measuring the tax benefit that is more-likely-than-not to be realized. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a taxexpense in the current reporting period.

For California tax purposes, Farm Credit West can exclude from taxable income all patronage-sourced income. Therefore, the provision for state income taxes is made only on non-patronage sourced earnings.

Patronage Distribution from CoBank

Effective January 1, 2012, patronage distributions from CoBank are accrued by the Association in the year earned.Prior to the bank merger, the Association historically recorded patronage distributions from AgBank upon the declaration and receipt of the distribution. Effective December 31, 2011, the Association accrued the AgBank patronage from its 2011 earnings as the distribution was declared. This resulted in the Association recognizing two years of patronage income from AgBank in 2011. The accrued 2011 patronage was paid by CoBank to the Association in March 2012.

Other Comprehensive Income (Loss)

Other comprehensive income/(loss) refers to revenue, expenses, gains, and losses that under generally accepted accounting principles are recorded as an element of members’ equity and comprehensive income but are excluded from net income. Farm Credit West records other comprehensive income/(loss) based on: (1) the market value of its investment securities available-for-sale; and, (2) the liability associated with the Pension Restoration Plan (described in Note 12).

Fair Value Measurement

Financial Accounting Standards Board (FASB) guidance defines fair value, establishes a framework for measuring fair value, and specifies disclosures about fair value measurements. It describes three levels of inputs that may be used to measure fair value.

Level 1: Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2: Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. Level 2 inputs include the following: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active so that they are traded less frequently than exchange-traded instruments, the prices are not current or principal market information is not released publicly; (c) inputs other than quoted prices that are observable such as interest rates and yield curves, prepayment speeds, credit risks and default rates and (d) inputs derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Unobservable inputs are those that are supported by little or no market activity and that are significant to the determination of fair value of the assets or liabilities. These unobservable inputs reflect the reporting entity’s own assumptions about factors that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.For Farm Credit West, Level 3 assets include investment securities – available-for-sale, certain impaired loans, and other property owned.

Fair value disclosures are presented in Note 16.

Recently Issued or Adopted Accounting Pronouncements

In February 2013, the FASB issued guidance, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” The guidance requires entities to present either parenthetically on the face of the financial statements or in the notes to the financial statements, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. For nonpublic entities, the guidance is effective for annual periods beginning after December 15, 2013. The adoption of this guidance did not impact the financial condition or results of operations, but did result in additional disclosures.



Farm Credit West purchases and sells loan participations with other parties in order to diversify risk, manage loan volume and comply with FCA regulations. The following tables present information regarding participations purchased and sold. Participations purchased volume includes loan syndications.

December 31, 2013 Farm Credit Non-Farm Credit(in thousands) Institutions Institutions Total

Agribusiness loans 354,113$ 73,090$ 427,203$ Real estate mortgage loans 259,357 6,574 265,931 Communication loans 84,647 — 84,647 Energy loans 55,710 — 55,710 Total participations purchased 753,827$ 79,664$ 833,491$

Participations Purchased


Real estate mortgage loans (629,715)$ (5,285)$ (635,000)$ Production and intermediate-term loans (345,777) — (345,777)Direct financing leases (145,526) — (145,526)Agribusiness loans (145,386) — (145,386)

Total participations sold (1,266,404)$ (5,285)$ (1,271,689)$

Participations Sold

Farm Credit West classifies loans according to the FCA Uniform Classification System (UCS). Following are definitions of the five UCS classifications.

Acceptable – Assets are expected to be fully collectible and represent the highest quality.

Other Assets Especially Mentioned – Assets are currently collectible but exhibit some potential weakness.

Substandard – Assets exhibit some serious weakness in repayment capacity, equity, and/or collateral pledged on the loan.



The following table shows loans and related accrued interest classified under the FCA Uniform Classification System as a percentage of total loans and related accrued interest by loan type.

December 31, 2013 2012 2011

Real estate mortgage loans Acceptable 92.6% 93.6% 92.3% OAEM 3.2% 1.5% 3.0% Substandard 4.2% 4.9% 4.7% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Production and intermediate-term loans Acceptable 88.8% 88.8% 85.8% OAEM 3.3% 3.3% 4.5% Substandard 7.7% 7.3% 9.7% Doubtful 0.2% 0.6% 0.0% Total 100.0% 100.0% 100.0%

Agribusiness loans Acceptable 95.9% 92.8% 93.0% OAEM 1.9% 3.2% 2.4% Substandard 2.2% 4.0% 4.6% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Communication loans Acceptable 100.0% 100.0% 100.0% OAEM 0.0% 0.0% 0.0% Substandard 0.0% 0.0% 0.0% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Energy loans Acceptable 100.0% 100.0% 100.0% OAEM 0.0% 0.0% 0.0% Substandard 0.0% 0.0% 0.0% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Direct financing leases Acceptable 96.8% 98.6% 98.7% OAEM 1.9% 0.8% 0.1% Substandard 1.3% 0.6% 1.2% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Total loans Acceptable 92.6% 92.6% 90.9% OAEM 2.9% 2.1% 3.2% Substandard 4.4% 5.1% 5.9% Doubtful 0.1% 0.2% 0.0% Total 100.0% 100.0% 100.0%

There were no loans classified as loss at any of the dates presented above.


Note 3 – Loans and Allowance for Loan Losses

A summary of loan principal outstanding follows.


Real estate mortgage loans 3,624,929$ 3,528,070$ 3,258,268$ Production and intermediate-term loans 1,410,281 1,364,489 1,403,461 Agribusiness loans: Processing and marketing 660,401 626,290 602,945 Farm related businesses 323,905 262,841 213,699 Loans to cooperatives 106,852 82,083 64,270 Direct financing leases 147,840 119,323 94,593 Communication loans 84,647 71,818 16,578 Energy loans 55,711 23,272 1,952

Total loans 6,414,566$ 6,078,186$ 5,655,766$

Farm Credit West’s leasing operations consist principally of the leasing of various types of agricultural equipment. Most Farm Credit West leases are classified as direct financing leases, the financial components of which are detailed in the following table. Farm Credit West’s leases typically expire during the next five years.

The following table summarizes the components of the net investment in direct financing leases included as a component of loans in the Consolidated Balance Sheet.


Minimum lease payments receivable 298,727$ 244,674$ 225,473$ Unearned income (28,930) (24,540) (24,551) Estimated residual values 23,569 20,656 19,242 Participation interest sold (145,526) (121,467) (125,571)

Direct financing leases 147,840$ 119,323$ 94,593$

In December 2013, Farm Credit West sold participation interests in certain direct financing leases totaling $72.0 million to CoBank’s Farm Credit Leasing Corporation (FCL). No gain or loss was recognized in the financial statements upon sale. Farm Credit West also sold participation interests in certain direct financing leases totaling $46.8 million in December 2012 and $35.8 million in December 2011 to FCL. No gain or loss was recognized in the financial statements upon completion of those sales.

Operating lease assets are a component of other assets on the Consolidated Balance Sheet. Net operating lease assets were $4.9 million at December 31, 2013, $4.7 million at December 31, 2012, and $4.5 million at December 31, 2011.

Farm Credit West's concentration of credit risk in various agricultural commodities is shown in the following table.


Dairy 1,097,385$ 1,147,509$ 1,090,531$ Edible tree nuts 985,012 874,744 756,526 Wine grapes/wine 664,409 610,693 576,940 Processing and marketing 660,401 626,290 602,945 Vegetables 448,815 437,169 421,204 Field/feed crops 422,891 387,022 383,406 Farm related business 323,905 262,841 213,698 Tree fruit 314,635 286,116 270,381 Citrus/avocados 289,731 271,675 249,193 Livestock 257,151 300,953 299,849 Flowers/nursery 221,568 218,520 218,757 Table grapes 195,877 189,067 187,767 Rice 147,749 155,238 136,891 Other 385,037 310,349 247,678

Total 6,414,566$ 6,078,186$ 5,655,766$

While the amounts shown in the previous table represent the maximum amounts of the Association’s potential credit risk as it relates to recorded loan principal, a substantial portion of the Association’s loans are collateralized. Accordingly, the Association’s exposure to credit loss associated with lending activities is considerably less than the recorded loan balances. An estimate of Farm Credit West’s credit risk exposure is considered in the determination of the allowance.

The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but typically includes farmland and income-producing property, such as crops and livestock, as well as receivables. Long-term real estate loans are secured by first liens on the underlying real property. System regulations state that long-term real estate loans are not to exceed 85% (97% if guaranteed by a government agency) of the property's appraised value. However, a decline in a property's market value subsequent to loan origination or advances, or other actions necessary to protect Farm Credit West’s financial interest in the collateral, may result in loan to value ratios in excess of the regulatory maximum.



Farm Credit West purchases and sells loan participations with other parties in order to diversify risk, manage loan volume and comply with FCA regulations. The following tables present information regarding participations purchased and sold. Participations purchased volume includes loan syndications.


Agribusiness loans 354,113$ 73,090$ 427,203$ Real estate mortgage loans 259,357 6,574 265,931 Communication loans 84,647 — 84,647 Energy loans 55,710 — 55,710 Total participations purchased 753,827$ 79,664$ 833,491$

Participations Purchased


Real estate mortgage loans (629,715)$ (5,285)$ (635,000)$ Production and intermediate-term loans (345,777) — (345,777)Direct financing leases (145,526) — (145,526)Agribusiness loans (145,386) — (145,386)

Total participations sold (1,266,404)$ (5,285)$ (1,271,689)$

Participations Sold

Farm Credit West classifies loans according to the FCA Uniform Classification System (UCS). Following are definitions of the five UCS classifications.

Acceptable – Assets are expected to be fully collectible and represent the highest quality.

Other Assets Especially Mentioned – Assets are currently collectible but exhibit some potential weakness.

Substandard – Assets exhibit some serious weakness in repayment capacity, equity, and/or collateral pledged on the loan.



The following table shows loans and related accrued interest classified under the FCA Uniform Classification System as a percentage of total loans and related accrued interest by loan type.

December 31, 2013 2012 2011

Real estate mortgage loans Acceptable 92.6% 93.6% 92.3% OAEM 3.2% 1.5% 3.0% Substandard 4.2% 4.9% 4.7% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Production and intermediate-term loans Acceptable 88.8% 88.8% 85.8% OAEM 3.3% 3.3% 4.5% Substandard 7.7% 7.3% 9.7% Doubtful 0.2% 0.6% 0.0% Total 100.0% 100.0% 100.0%

Agribusiness loans Acceptable 95.9% 92.8% 93.0% OAEM 1.9% 3.2% 2.4% Substandard 2.2% 4.0% 4.6% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Communication loans Acceptable 100.0% 100.0% 100.0% OAEM 0.0% 0.0% 0.0% Substandard 0.0% 0.0% 0.0% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Energy loans Acceptable 100.0% 100.0% 100.0% OAEM 0.0% 0.0% 0.0% Substandard 0.0% 0.0% 0.0% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Direct financing leases Acceptable 96.8% 98.6% 98.7% OAEM 1.9% 0.8% 0.1% Substandard 1.3% 0.6% 1.2% Doubtful 0.0% 0.0% 0.0% Total 100.0% 100.0% 100.0%

Total loans Acceptable 92.6% 92.6% 90.9% OAEM 2.9% 2.1% 3.2% Substandard 4.4% 5.1% 5.9% Doubtful 0.1% 0.2% 0.0% Total 100.0% 100.0% 100.0%

There were no loans classified as loss at any of the dates presented above.


Note 3 – Loans and Allowance for Loan Losses

A summary of loan principal outstanding follows.


Real estate mortgage loans 3,624,929$ 3,528,070$ 3,258,268$ Production and intermediate-term loans 1,410,281 1,364,489 1,403,461 Agribusiness loans: Processing and marketing 660,401 626,290 602,945 Farm related businesses 323,905 262,841 213,699 Loans to cooperatives 106,852 82,083 64,270 Direct financing leases 147,840 119,323 94,593 Communication loans 84,647 71,818 16,578 Energy loans 55,711 23,272 1,952

Total loans 6,414,566$ 6,078,186$ 5,655,766$

Farm Credit West’s leasing operations consist principally of the leasing of various types of agricultural equipment. Most Farm Credit West leases are classified as direct financing leases, the financial components of which are detailed in the following table. Farm Credit West’s leases typically expire during the next five years.

The following table summarizes the components of the net investment in direct financing leases included as a component of loans in the Consolidated Balance Sheet.


Minimum lease payments receivable 298,727$ 244,674$ 225,473$ Unearned income (28,930) (24,540) (24,551) Estimated residual values 23,569 20,656 19,242 Participation interest sold (145,526) (121,467) (125,571)

Direct financing leases 147,840$ 119,323$ 94,593$

In December 2013, Farm Credit West sold participation interests in certain direct financing leases totaling $72.0 million to CoBank’s Farm Credit Leasing Corporation (FCL). No gain or loss was recognized in the financial statements upon sale. Farm Credit West also sold participation interests in certain direct financing leases totaling $46.8 million in December 2012 and $35.8 million in December 2011 to FCL. No gain or loss was recognized in the financial statements upon completion of those sales.

Operating lease assets are a component of other assets on the Consolidated Balance Sheet. Net operating lease assets were $4.9 million at December 31, 2013, $4.7 million at December 31, 2012, and $4.5 million at December 31, 2011.

Farm Credit West's concentration of credit risk in various agricultural commodities is shown in the following table.


Dairy 1,097,385$ 1,147,509$ 1,090,531$ Edible tree nuts 985,012 874,744 756,526 Wine grapes/wine 664,409 610,693 576,940 Processing and marketing 660,401 626,290 602,945 Vegetables 448,815 437,169 421,204 Field/feed crops 422,891 387,022 383,406 Farm related business 323,905 262,841 213,698 Tree fruit 314,635 286,116 270,381 Citrus/avocados 289,731 271,675 249,193 Livestock 257,151 300,953 299,849 Flowers/nursery 221,568 218,520 218,757 Table grapes 195,877 189,067 187,767 Rice 147,749 155,238 136,891 Other 385,037 310,349 247,678

Total 6,414,566$ 6,078,186$ 5,655,766$

While the amounts shown in the previous table represent the maximum amounts of the Association’s potential credit risk as it relates to recorded loan principal, a substantial portion of the Association’s loans are collateralized. Accordingly, the Association’s exposure to credit loss associated with lending activities is considerably less than the recorded loan balances. An estimate of Farm Credit West’s credit risk exposure is considered in the determination of the allowance.

The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but typically includes farmland and income-producing property, such as crops and livestock, as well as receivables. Long-term real estate loans are secured by first liens on the underlying real property. System regulations state that long-term real estate loans are not to exceed 85% (97% if guaranteed by a government agency) of the property's appraised value. However, a decline in a property's market value subsequent to loan origination or advances, or other actions necessary to protect Farm Credit West’s financial interest in the collateral, may result in loan to value ratios in excess of the regulatory maximum.



To mitigate the risk of loan losses, Farm Credit West has obtained credit enhancements by entering into Long-Term Standby Commitment to Purchase agreements with the Federal Agricultural Mortgage Corporation (Farmer Mac). Under the agreements, which are effectively credit guarantees that will remain in place until the loans are paid in full, Farmer Mac agrees to purchase loans from Farm Credit West in the event of default (typically when a guaranteed loan becomes four months past due), subject to certain conditions. In return, the Association pays Farmer Mac commitment fees based on the outstanding balance of loans covered by the Agreements. The principal balance of the loans under the Long-Term Standby Commitment was $81.6 million at December 31, 2013, $95.4 million at December 31, 2012, and $98.3 million at December 31, 2011. Fees paid to Farmer Mac for such commitments totaled $0.3 million during 2013, $0.3 million during 2012, and $0.3 million during 2011. Those Farmer Mac fees were classified as reductions in interest income. Other fees paid to Farmer Mac related to securitized loans are noted elsewhere in this report.

In addition to Farmer Mac, credit enhancements with federal government agencies of $12.6 million at year-end 2013, $15.6 million at year-end 2012 and $16.1 million at year-end 2011 were also outstanding.

Impaired loans are loans for which it is probable that not all principal and interest will be collected according to the contractual terms. The following table presents information concerning impaired loans including accrued interest, if any.


Impaired nonaccrual loans: Current as to principal and interest 43,043$ 58,909$ 93,447$ Past due 43,123 68,285 29,908 Total nonaccrual loans 86,166 127,194 123,355 Impaired accrual loans: Accrual restructured 2,662 5,966 — Accrual loans 90 days or more past due 33 884 6,470 Total impaired accrual loans 2,695 6,850 6,470

Total impaired loans 88,861$ 134,044$ 129,825$

At December 31, 2013, there were approximately $9.1 million in commitments to lend additional funds to debtors whose loans were classified as impaired. Such commitments have been considered when establishing the overall allowance.

Impaired assets consist of impaired loans and other property owned. The following table shows impaired assets and includes a detail of impaired loans by loan type.


Nonaccrual loans Real estate mortgage 35,441$ 68,273$ 35,590$ Production and intermediate-term 45,721 51,251 76,503 Agribusiness 4,330 7,526 10,877 Direct financing leases 674 144 385 Total nonaccrual loans 86,166 127,194 123,355

Accrual restructured loans Real estate mortgage — 2,055 — Production and intermediate-term 2,662 3,911 — Total accruing restructured loans 2,662 5,966 —

Accrual loans 90 days or more past due Real estate mortgage — — 3,954 Production and intermediate-term 33 884 1,032 Agribusiness — — 1,483 Direct financing leases — — 1 Total accrual loans 90 days or more past due 33 884 6,470

Total impaired loans 88,861 134,044 129,825

Other property owned 9,634 28,974 64,140

Total impaired assets 98,495$ 163,018$ 193,965$

Additional impaired loan information is shown in the following seven tables. Impaired loans which carried no related specific allowance for loan loss were considered in the determination of the overall allowance.

Impaired ImpairedDecember 31, 2013 with related with no related Total(in thousands) allowance allowance Impaired

Production and intermediate-term loans 32,397$ 16,019$ 48,416$ Real estate mortgage loans 5,847 29,594 35,441 Agribusiness loans Farm related businesses 3,864 207 4,071 Processing and marketing 259 — 259 Direct financing leases 86 588 674

Total 42,453$ 46,408$ 88,861$

Recorded Investment in Impaired Loans



Production and intermediate-term loans 39,561$ 16,485$ 56,046$Real estate mortgage loans 4,152 66,176 70,328Agribusiness loans Farm related businesses 2,354 1,563 3,917 Processing and marketing 1,909 1,700 3,609Direct financing leases 119 25 144

Total 48,095$ 85,949$ 134,044$



Production and intermediate-term loans 60,466$ 17,069$ 77,535$Real estate mortgage loans 239 39,305 39,544Agribusiness loans Farm related businesses 2,538 5,398 7,936 Processing and marketing 1,795 2,629 4,424Direct financing leases 209 177 386

Total 65,247$ 64,578$ 129,825$




Total 150,262$ 199,998$ 169,082$

Unpaid Principal Balance on Impaired Loans


Production and intermediate-term loans 9,215$ 10,502$ 11,040$Real estate mortgage loans 2,399 2,091 75Agribusiness loans Farm related businesses 1,280 379 — Processing and marketing 135 858 1,065Direct financing leases 67 77 89

Total 13,096$ 13,907$ 12,269$

Related Allowance on Impaired Loans



Total 107,356$ 127,765$ 103,858$

Average Impaired Loans


Production and intermediate-term loans 280$ 223$ 1,190$Real estate mortgage loans 2,518 267 551Agribusiness loans Farm related businesses 20 344 3 Processing and marketing 16 253 145Direct financing leases 5 2 —

Total 2,839$ 1,089$ 1,889$

Interest Income Recognized onImpaired Loans

Interest income is recognized and cash payments are applied on nonaccrual impaired loans as described in Note 2. The following table presents interest income recognized on impaired loans.

For the year ended December 31,(in thousands) 2013 2012 2011

Interest income recognized on: Nonaccrual loans 2,508$ 880$ 1,794$ Accrual restructured loans 110 62 — Accrual loans 90 days or more past due 221 147 95Interest income recognized on impaired loans 2,839$ 1,089$ 1,889$

Interest income on nonaccrual loans and accrual restructured loans that would have been recognized under the original terms of the loans follows.


Interest income which would have been recognized under original loan terms 3,903$ 5,228$ 4,512$Less: interest income recognized (2,618) (942) (1,794)

Foregone interest income 1,285$ 4,286$ 2,718$



To mitigate the risk of loan losses, Farm Credit West has obtained credit enhancements by entering into Long-Term Standby Commitment to Purchase agreements with the Federal Agricultural Mortgage Corporation (Farmer Mac). Under the agreements, which are effectively credit guarantees that will remain in place until the loans are paid in full, Farmer Mac agrees to purchase loans from Farm Credit West in the event of default (typically when a guaranteed loan becomes four months past due), subject to certain conditions. In return, the Association pays Farmer Mac commitment fees based on the outstanding balance of loans covered by the Agreements. The principal balance of the loans under the Long-Term Standby Commitment was $81.6 million at December 31, 2013, $95.4 million at December 31, 2012, and $98.3 million at December 31, 2011. Fees paid to Farmer Mac for such commitments totaled $0.3 million during 2013, $0.3 million during 2012, and $0.3 million during 2011. Those Farmer Mac fees were classified as reductions in interest income. Other fees paid to Farmer Mac related to securitized loans are noted elsewhere in this report.

In addition to Farmer Mac, credit enhancements with federal government agencies of $12.6 million at year-end 2013, $15.6 million at year-end 2012 and $16.1 million at year-end 2011 were also outstanding.

Impaired loans are loans for which it is probable that not all principal and interest will be collected according to the contractual terms. The following table presents information concerning impaired loans including accrued interest, if any.


Impaired nonaccrual loans: Current as to principal and interest 43,043$ 58,909$ 93,447$ Past due 43,123 68,285 29,908 Total nonaccrual loans 86,166 127,194 123,355 Impaired accrual loans: Accrual restructured 2,662 5,966 — Accrual loans 90 days or more past due 33 884 6,470 Total impaired accrual loans 2,695 6,850 6,470

Total impaired loans 88,861$ 134,044$ 129,825$

At December 31, 2013, there were approximately $9.1 million in commitments to lend additional funds to debtors whose loans were classified as impaired. Such commitments have been considered when establishing the overall allowance.

Impaired assets consist of impaired loans and other property owned. The following table shows impaired assets and includes a detail of impaired loans by loan type.


Nonaccrual loans Real estate mortgage 35,441$ 68,273$ 35,590$ Production and intermediate-term 45,721 51,251 76,503 Agribusiness 4,330 7,526 10,877 Direct financing leases 674 144 385 Total nonaccrual loans 86,166 127,194 123,355

Accrual restructured loans Real estate mortgage — 2,055 — Production and intermediate-term 2,662 3,911 — Total accruing restructured loans 2,662 5,966 —

Accrual loans 90 days or more past due Real estate mortgage — — 3,954 Production and intermediate-term 33 884 1,032 Agribusiness — — 1,483 Direct financing leases — — 1 Total accrual loans 90 days or more past due 33 884 6,470

Total impaired loans 88,861 134,044 129,825

Other property owned 9,634 28,974 64,140

Total impaired assets 98,495$ 163,018$ 193,965$

Additional impaired loan information is shown in the following seven tables. Impaired loans which carried no related specific allowance for loan loss were considered in the determination of the overall allowance.


Production and intermediate-term loans 32,397$ 16,019$ 48,416$ Real estate mortgage loans 5,847 29,594 35,441 Agribusiness loans Farm related businesses 3,864 207 4,071 Processing and marketing 259 — 259 Direct financing leases 86 588 674

Total 42,453$ 46,408$ 88,861$





Total 48,095$ 85,949$ 134,044$



Production and intermediate-term loans 60,466$ 17,069$ 77,535$Real estate mortgage loans 239 39,305 39,544Agribusiness loans Farm related businesses 2,538 5,398 7,936 Processing and marketing 1,795 2,629 4,424Direct financing leases 209 177 386

Total 65,247$ 64,578$ 129,825$




Total 150,262$ 199,998$ 169,082$

Unpaid Principal Balance on Impaired Loans


Production and intermediate-term loans 9,215$ 10,502$ 11,040$Real estate mortgage loans 2,399 2,091 75Agribusiness loans Farm related businesses 1,280 379 — Processing and marketing 135 858 1,065Direct financing leases 67 77 89

Total 13,096$ 13,907$ 12,269$

Related Allowance on Impaired Loans



Total 107,356$ 127,765$ 103,858$

Average Impaired Loans


Production and intermediate-term loans 280$ 223$ 1,190$Real estate mortgage loans 2,518 267 551Agribusiness loans Farm related businesses 20 344 3 Processing and marketing 16 253 145Direct financing leases 5 2 —

Total 2,839$ 1,089$ 1,889$

Interest Income Recognized onImpaired Loans

Interest income is recognized and cash payments are applied on nonaccrual impaired loans as described in Note 2. The following table presents interest income recognized on impaired loans.


Interest income recognized on: Nonaccrual loans 2,508$ 880$ 1,794$ Accrual restructured loans 110 62 — Accrual loans 90 days or more past due 221 147 95Interest income recognized on impaired loans 2,839$ 1,089$ 1,889$

Interest income on nonaccrual loans and accrual restructured loans that would have been recognized under the original terms of the loans follows.


Interest income which would have been recognized under original loan terms 3,903$ 5,228$ 4,512$Less: interest income recognized (2,618) (942) (1,794)

Foregone interest income 1,285$ 4,286$ 2,718$



The following table summarizes changes in the allowanceand includes detail regarding charge-off, recovery and provision activity by loan type.



Provision for loan losses/ (loan loss reversal): Production and intermediate-term loans 10,488 10,145 19,027 Real estate mortgage loans 2,205 4,235 2,409 Agribusiness loans (415) 1,175 1,076 Direct financing leases 60 428 394 Communication loans 26 52 22 Energy loans 42 11 47 Total provision for loan losses 12,406 16,046 22,975Charge-offs: Production and intermediate-term loans (10,360) (10,802) (14,592) Real estate mortgage loans (1,141) (1,878) (1,747) Agribusiness loans (79) — (1,087) Direct financing leases — (43) (360) Total charge-offs (11,580) (12,723) (17,786)Recoveries: Production and intermediate-term loans 660 191 102Real Estate Mortgage Loans 6 — — Agribusiness loans 8 86 109 Direct financing leases — — — Total recoveries 674 277 211 Net charge-offs (10,906) (12,446) (17,575)Balance at December 31 34,700$ 33,200$ 29,600$


A breakdown of the allowance by loan type follows.


Production and intermediate-term loans 18,672$ 17,884$ 18,350$Real estate mortgage loans 10,152 9,082 6,725Agribusiness loans 4,600 5,086 3,825Direct financing leases 1,076 1,016 631Communication loans 100 74 22Energy loans 100 58 47

Total allowance for loan losses 34,700$ 33,200$ 29,600$

The following tables contain summaries of the recorded investment in loans by loan type and the allowance for loan losses by loan type.

Principal and interest Collectively IndividuallyDecember 31, 2013 Evaluated for Evaluated for Total(in thousands) Impairment Impairment Loans

Real estate mortgage loans 3,622,236$ 35,441$ 3,657,677$Production and intermediate-term loans 1,371,336 45,721 1,417,057Agribusiness loans 1,093,470 4,330 1,097,800Direct financing leases 147,166 674 147,840Communication loans 84,706 — 84,706Energy loans 55,753 — 55,753

Total 6,374,667$ 86,166$ 6,460,833$

Recorded Investment in Loans

Collectively IndividuallyDecember 31, 2013 Evaluated for Evaluated for Total(in thousands) Impairment Impairment Allowance

Real estate mortgage loans 7,753$ 2,399$ 10,152$Production and intermediate-term loans 9,457 9,215 18,672Agribusiness loans 3,185 1,415 4,600Direct financing leases 1,009 67 1,076Communication loans 100 — 100Energy loans 100 — 100

Total 21,604$ 13,096$ 34,700$

Allowance for Loan Losses

Note 4 – Investment Securities

Farm Credit West’s investment securities portfolio is comprised entirely of Farmer Mac guaranteed agricultural mortgage-backed securities (AMBS). In three separate transactions during 2003 and 2006, the Association securitized a total of $1.402 billion in real estate mortgage loans into Farmer Mac mortgage-backed securities. Portions of two of these securities transactions were subsequently sold to U.S. AgBank (now CoBank). Accordingly, the remaining portions of these two AMBS portfolios are classified as available-for-sale and carried at fair value. At December 31, 2013, an unrealized gain on investment securities – available-for-sale totaling $5.1 million was recognized as a component of accumulated other comprehensive income on the accompanying Consolidated Balance Sheet. The $1.1 million decrease in that unrealized gain on investment securities –available-for-sale during 2013 is a part of other comprehensive income on the accompanying Consolidated Statement of Comprehensive Income.

Farm Credit West has not sold any of the third pool of Farmer Mac securities. The Association has the intent and ability to hold these mortgage-backed investment securities to


The following tables provide an age analysis of past due loans including accrued interest as of December 31, 2013.

Principal and interest Not Past DueDecember 31, 2013 or Less Than 30 Total Total(in thousands) Days Past Due Past Due Loans


Total loans 6,393,986$ 66,847$ 6,460,833$

Principal and interestDecember 31, 2013 30-89 Days 90 Days or Total(in thousands) Past Due More Past Due Past Due

Real estate mortgage loans 17,615$ 9,500$ 27,115$Production and intermediate-term loans 11,903 24,914 36,817Agribusiness loans 78 2,590 2,668Direct financing leases 237 10 247Communication loans — — —Energy loans — — —

Total loans 29,833$ 37,014$ 66,847$

A restructuring of a loan constitutes a troubled debt restructuring (TDR) if, for economic or legal reasons related to the debtor’s financial difficulties, the Association grants a concession to the debtor that it would not otherwise consider.

The following tables present additional information regarding troubled debt restructurings (whether accrual or nonaccrual).

Pre-modification Post-modificationDecember 31, 2013 Outstanding Outstanding(in thousands) Recorded Investment Recorded Investment

Troubled debt restructurings: Production and intermediate-term loans 828$ 828$ Real estate mortgage loans — —

Total 828$ 828$


Troubled debt restructurings: Production and intermediate-term loans 3,831$ 3,831$ Real estate mortgage loans 2,062 2,062

Total 5,893$ 5,893$



Total 18,005$ 18,005$

There were no TDRs that occurred within the previous 12 months for which there was a subsequent payment default during 2013.

The following tables provide information on outstanding loans restructured in troubled debt restructurings at period end. These loans are included as impaired loans in the impaired loan table.


Production and intermediate-term loans 2,662$ 3,911$ —Real estate mortgage loans — 2,055 —

Total 2,662$ 5,966$ —

Accrual Restructured Loans


Production and intermediate-term loans 11,152$ 9,800$ 25,235$Real estate mortgage loans 9,925 8,794 9,598

Total 21,077$ 18,594$ 34,833$

TDRs in Nonaccrual Status

Additional commitments to lend to borrowers whose loans have been modified in a TDR were $0.2 million at December 31, 2013, $5.9 million at December 31, 2012, and $0.1 million at December 31, 2011.



The following table summarizes changes in the allowanceand includes detail regarding charge-off, recovery and provision activity by loan type.



Provision for loan losses/ (loan loss reversal): Production and intermediate-term loans 10,488 10,145 19,027 Real estate mortgage loans 2,205 4,235 2,409 Agribusiness loans (415) 1,175 1,076 Direct financing leases 60 428 394 Communication loans 26 52 22 Energy loans 42 11 47 Total provision for loan losses 12,406 16,046 22,975Charge-offs: Production and intermediate-term loans (10,360) (10,802) (14,592) Real estate mortgage loans (1,141) (1,878) (1,747) Agribusiness loans (79) — (1,087) Direct financing leases — (43) (360) Total charge-offs (11,580) (12,723) (17,786)Recoveries: Production and intermediate-term loans 660 191 102Real Estate Mortgage Loans 6 — — Agribusiness loans 8 86 109 Direct financing leases — — — Total recoveries 674 277 211 Net charge-offs (10,906) (12,446) (17,575)Balance at December 31 34,700$ 33,200$ 29,600$


A breakdown of the allowance by loan type follows.


Production and intermediate-term loans 18,672$ 17,884$ 18,350$Real estate mortgage loans 10,152 9,082 6,725Agribusiness loans 4,600 5,086 3,825Direct financing leases 1,076 1,016 631Communication loans 100 74 22Energy loans 100 58 47

Total allowance for loan losses 34,700$ 33,200$ 29,600$

The following tables contain summaries of the recorded investment in loans by loan type and the allowance for loan losses by loan type.

Principal and interest Collectively IndividuallyDecember 31, 2013 Evaluated for Evaluated for Total(in thousands) Impairment Impairment Loans


Total 6,374,667$ 86,166$ 6,460,833$

Recorded Investment in Loans

Collectively IndividuallyDecember 31, 2013 Evaluated for Evaluated for Total(in thousands) Impairment Impairment Allowance

Real estate mortgage loans 7,753$ 2,399$ 10,152$Production and intermediate-term loans 9,457 9,215 18,672Agribusiness loans 3,185 1,415 4,600Direct financing leases 1,009 67 1,076Communication loans 100 — 100Energy loans 100 — 100

Total 21,604$ 13,096$ 34,700$

Allowance for Loan Losses

Note 4 – Investment Securities

Farm Credit West’s investment securities portfolio is comprised entirely of Farmer Mac guaranteed agricultural mortgage-backed securities (AMBS). In three separate transactions during 2003 and 2006, the Association securitized a total of $1.402 billion in real estate mortgage loans into Farmer Mac mortgage-backed securities. Portions of two of these securities transactions were subsequently sold to U.S. AgBank (now CoBank). Accordingly, the remaining portions of these two AMBS portfolios are classified as available-for-sale and carried at fair value. At December 31, 2013, an unrealized gain on investment securities – available-for-sale totaling $5.1 million was recognized as a component of accumulated other comprehensive income on the accompanying Consolidated Balance Sheet. The $1.1 million decrease in that unrealized gain on investment securities –available-for-sale during 2013 is a part of other comprehensive income on the accompanying Consolidated Statement of Comprehensive Income.

Farm Credit West has not sold any of the third pool of Farmer Mac securities. The Association has the intent and ability to hold these mortgage-backed investment securities to


The following tables provide an age analysis of past due loans including accrued interest as of December 31, 2013.

Principal and interest Not Past DueDecember 31, 2013 or Less Than 30 Total Total(in thousands) Days Past Due Past Due Loans


Total loans 6,393,986$ 66,847$ 6,460,833$

Principal and interestDecember 31, 2013 30-89 Days 90 Days or Total(in thousands) Past Due More Past Due Past Due

Real estate mortgage loans 17,615$ 9,500$ 27,115$Production and intermediate-term loans 11,903 24,914 36,817Agribusiness loans 78 2,590 2,668Direct financing leases 237 10 247Communication loans — — —Energy loans — — —

Total loans 29,833$ 37,014$ 66,847$

A restructuring of a loan constitutes a troubled debt restructuring (TDR) if, for economic or legal reasons related to the debtor’s financial difficulties, the Association grants a concession to the debtor that it would not otherwise consider.

The following tables present additional information regarding troubled debt restructurings (whether accrual or nonaccrual).


Troubled debt restructurings: Production and intermediate-term loans 828$ 828$ Real estate mortgage loans — —

Total 828$ 828$



Total 5,893$ 5,893$



Total 18,005$ 18,005$

There were no TDRs that occurred within the previous 12 months for which there was a subsequent payment default during 2013.

The following tables provide information on outstanding loans restructured in troubled debt restructurings at period end. These loans are included as impaired loans in the impaired loan table.


Production and intermediate-term loans 2,662$ 3,911$ —Real estate mortgage loans — 2,055 —

Total 2,662$ 5,966$ —

Accrual Restructured Loans


Production and intermediate-term loans 11,152$ 9,800$ 25,235$Real estate mortgage loans 9,925 8,794 9,598

Total 21,077$ 18,594$ 34,833$

TDRs in Nonaccrual Status

Additional commitments to lend to borrowers whose loans have been modified in a TDR were $0.2 million at December 31, 2013, $5.9 million at December 31, 2012, and $0.1 million at December 31, 2011.



maturity. Accordingly, these securities are classified as held-to-maturity and carried at amortized cost.

As noted above, in 2004, 2006, and 2007, Farm Credit West sold a total of $649 million of Farmer Mac AMBS securities to AgBank at par. In accordance with FASB guidance, the Association recognized gains totaling $8.8 million related to the value of those mortgage servicing rights and other beneficial interests retained in connection with the securities sold to AgBank. The value of the mortgage servicing rights had declined to $6.5 million at December 31, 2013.Mortgage servicing rights are included with other assets on the Consolidated Balance Sheet.

Fees paid to Farmer Mac related to securities owned by Farm Credit West reduced the Association’s investment security interest income by $0.7 million during 2013, $0.9 millionduring 2012, and $1.1 million during 2011. Furthermore, as a part of the accounting for ongoing sold securitiestransactions, Farm Credit West has paid fees to Farmer Mac related to the portfolio of securitized loans sold to CoBank.Those fees totaled $ 0.8 million in 2013, $1.0 million in 2012, and $1.2 million in 2011.

Substantially all mortgage-backed securities have contractual maturities in excess of ten years. However, expected and actual maturities for mortgage-backed securities will typically be shorter than contractual maturity due to scheduled and unscheduled payment activity affecting the loans underlying such securities. Materially shortened maturities could negatively impact the value of the mortgage servicing rights Farm Credit West has recognized on sold securities it continues to service.

The following is a summary of Farmer Mac agricultural mortgage-backed securities.

Weighted(dollars Amortized Fair Average in thousands) Cost Gains Losses Value Yield

December 31, 2013 145,606$ 5,067$ —$ 150,673$ 4.28%December 31, 2012 165,298 6,144 — 171,442 4.35%December 31, 2011 195,466 7,478 — 202,944 4.45%

Gross Unrealized

Mortgage-Backed Securities — Available-for-Sale



Mortgage-Backed Securities — Held-to-Maturity

Gross Unrealized

None of Farm Credit West’s investment securities are in an unrealized loss position at December 31, 2013. Accordingly,no investment securities impairment has been recorded.

Note 5 – Investment in CoBank/AgBank

At December 31, 2013 the Association’s investment in CoBank is in the form of Class A stock with a par value of $100 per share. The Association is required to own stock in CoBank to capitalize its direct loan balance and participation loans sold to CoBank. The current requirement for capitalizing its direct loan from CoBank is 4% of the Association’s prior year average direct loan balance. The 2013 requirement for capitalizing its patronage-based participation loans sold to CoBank is 8% of the Association’sprior ten-year average balance of such participations sold to CoBank. Under the current CoBank capital plan applicable to such participations sold, patronage from CoBank related to these participations is paid 75% cash and 25% Class A stock.The capital plan is evaluated annually by CoBank’s board and management and its subject to change.

CoBank may require the holders of its equities to subscribe for such additional capital as may be needed to meet its capital requirements or its joint and several liability under the Act and regulations. In making such a capital call, CoBank shall take into account the financial condition of each suchholder and such other considerations, as it deems appropriate.

Pursuant to the January 1, 2012 merger between CoBank and AgBank, at year-end 2011, AgBank undertook a recapitalization transaction in order to align all associations with CoBank’s stock investment requirement. The recapitalization involved the tax-free issuance of AgBank common stock to each association in exchange for an equal amount of attributed surplus previously allocated on a patronage basis to such association. As a result of the merger, the Association’s investment in AgBank stock was converted to CoBank stock.

Prior to the AgBank merger with CoBank, Farm Credit West was required to maintain an investment in AgBank equal to 5.00% of average direct note borrowings, net of excess investment. Farm Credit West’s investment in AgBank consisted of AgBank retained earnings attributed to Farm Credit West, patronage-based stock, and purchased stock. The investment in AgBank was adjusted quarterly to reflect changes in Farm Credit West’s borrowings.

The Association owned approximately 7.88% of the outstanding common stock of CoBank at December 31, 2013.


Note 6 – Premises and Equipment

Premises and equipment consisted of the following.


Land, buildings, and improvements 22,241$ 13,438$ 12,000$Furniture and equipment 7,221 5,674 5,238Vehicles 2,333 2,734 2,864Construction in progress — 599 131 Premises and equipment at cost 31,795 22,445 20,233Less: accumulated depreciation (10,137) (9,000) (8,425) Total premises and equipment, net 21,658$ 13,445$ 11,808$

The following is a schedule by year of future minimum lease payments on noncancelable operating leases as of December 31, 2013.

For the year ended December 31,

2014 664$2015 6792016 6962017 6582018 319

Later years 93Total minimum future payments 3,109$

(in thousands)

Note 7 – Other Property OwnedNet (gain) loss on other property owned as reflected in the accompanying Consolidated Statement of Comprehensive Income consisted of the following.


(Gain) loss on sale, net (1,358)$ (912)$ 404$Carrying value adjustments — 4,109 7,513Operating expense, net 199 52 900

(Gain) loss on other property owned, net (1,159)$ 3,249$ 8,817$

Note 8 – Note Payable to CoBank/AgBank

Farm Credit West's indebtedness to CoBank primarily represents borrowings by Farm Credit West to fund its loan portfolio. This indebtedness is collateralized by a pledge to CoBank of substantially all of Farm Credit West's assets, and is governed by a general financing agreement (GFA).According to the agreement, the aggregate outstanding amount of principal and accrued interest shall not at any time exceed the borrowing base (commitment amount). AtDecember 31, 2013 Farm Credit West’s borrowing base was

approximately $5.7 billion. The GFA is subject to renewal periodically in accordance with normal business practice and requires the Association to comply with certain covenants.Farm Credit West was in compliance with the terms and conditions of the GFA as of December 31, 2013.

As stated in Note 1, prior to the AgBank merger with CoBankon January 1, 2012, AgBank was the Association’s funding bank.

Substantially all borrower loans were match-funded with CoBank. Payments and disbursements were made on the note payable to CoBank on the same basis the Association collects payments from and disburses on borrower loans. The interest rate may periodically be adjusted by CoBank based on the terms and conditions of the borrowing. The weighted average interest rate was 1.35% for the year-ended December 31, 2013. The GFA matures on May 31, 2018.The Association expects renewal of the GFA at that time.

Under the Farm Credit Act, Farm Credit West is obligated to borrow only from CoBank, unless CoBank gives approval to borrow elsewhere. CoBank, consistent with Systemregulations, has established limitations on the Association’s ability to borrow funds based on specified factors or formulas relating primarily to credit quality and financial condition. At December 31, 2013, the Association’s note payable waswithin the specified limitations.

Note 9 – Members’ Equity

Descriptions of Farm Credit West's capitalization requirements, capital protection mechanisms, regulatory capitalization requirements and restrictions, and equities areprovided below.

Common Equity Investment Requirement – Capital Stock and Participation Certificates

In accordance with Farm Credit West’s capitalization bylaws, as a condition of borrowing, each borrower is required to make a common equity investment in capital stock (for agricultural producers) or participation certificates (for non-producers). Those capitalization bylaws allow stock requirements to range from (1) the lesser of $1 thousand or two percent of the amount of the loan to (2) 7% of the loan. The Board of Directors has the authority to change the common equity requirement as long as the change is within this range. At December 31, 2013 (and for all periods presented in the Consolidated Balance Sheet), the required investment was $1 thousand per voting stockholder. Customers with multiple loans under common control satisfy their equity ownership requirement with a single $1 thousand cash investment. Farm Credit West may require shareholders to subscribe to additional common equity to meet minimum System capital adequacy regulations.

Farm Credit West retains a first lien on the stock or participation certificates owned by borrowers. In accordance



maturity. Accordingly, these securities are classified as held-to-maturity and carried at amortized cost.

As noted above, in 2004, 2006, and 2007, Farm Credit West sold a total of $649 million of Farmer Mac AMBS securities to AgBank at par. In accordance with FASB guidance, the Association recognized gains totaling $8.8 million related to the value of those mortgage servicing rights and other beneficial interests retained in connection with the securities sold to AgBank. The value of the mortgage servicing rights had declined to $6.5 million at December 31, 2013.Mortgage servicing rights are included with other assets on the Consolidated Balance Sheet.

Fees paid to Farmer Mac related to securities owned by Farm Credit West reduced the Association’s investment security interest income by $0.7 million during 2013, $0.9 millionduring 2012, and $1.1 million during 2011. Furthermore, as a part of the accounting for ongoing sold securitiestransactions, Farm Credit West has paid fees to Farmer Mac related to the portfolio of securitized loans sold to CoBank.Those fees totaled $ 0.8 million in 2013, $1.0 million in 2012, and $1.2 million in 2011.

Substantially all mortgage-backed securities have contractual maturities in excess of ten years. However, expected and actual maturities for mortgage-backed securities will typically be shorter than contractual maturity due to scheduled and unscheduled payment activity affecting the loans underlying such securities. Materially shortened maturities could negatively impact the value of the mortgage servicing rights Farm Credit West has recognized on sold securities it continues to service.

The following is a summary of Farmer Mac agricultural mortgage-backed securities.



Gross Unrealized

Mortgage-Backed Securities — Available-for-Sale



Mortgage-Backed Securities — Held-to-Maturity

Gross Unrealized

None of Farm Credit West’s investment securities are in an unrealized loss position at December 31, 2013. Accordingly,no investment securities impairment has been recorded.

Note 5 – Investment in CoBank/AgBank

At December 31, 2013 the Association’s investment in CoBank is in the form of Class A stock with a par value of $100 per share. The Association is required to own stock in CoBank to capitalize its direct loan balance and participation loans sold to CoBank. The current requirement for capitalizing its direct loan from CoBank is 4% of the Association’s prior year average direct loan balance. The 2013 requirement for capitalizing its patronage-based participation loans sold to CoBank is 8% of the Association’sprior ten-year average balance of such participations sold to CoBank. Under the current CoBank capital plan applicable to such participations sold, patronage from CoBank related to these participations is paid 75% cash and 25% Class A stock.The capital plan is evaluated annually by CoBank’s board and management and its subject to change.

CoBank may require the holders of its equities to subscribe for such additional capital as may be needed to meet its capital requirements or its joint and several liability under the Act and regulations. In making such a capital call, CoBank shall take into account the financial condition of each suchholder and such other considerations, as it deems appropriate.

Pursuant to the January 1, 2012 merger between CoBank and AgBank, at year-end 2011, AgBank undertook a recapitalization transaction in order to align all associations with CoBank’s stock investment requirement. The recapitalization involved the tax-free issuance of AgBank common stock to each association in exchange for an equal amount of attributed surplus previously allocated on a patronage basis to such association. As a result of the merger, the Association’s investment in AgBank stock was converted to CoBank stock.

Prior to the AgBank merger with CoBank, Farm Credit West was required to maintain an investment in AgBank equal to 5.00% of average direct note borrowings, net of excess investment. Farm Credit West’s investment in AgBank consisted of AgBank retained earnings attributed to Farm Credit West, patronage-based stock, and purchased stock. The investment in AgBank was adjusted quarterly to reflect changes in Farm Credit West’s borrowings.

The Association owned approximately 7.88% of the outstanding common stock of CoBank at December 31, 2013.


Note 6 – Premises and Equipment

Premises and equipment consisted of the following.


Land, buildings, and improvements 22,241$ 13,438$ 12,000$Furniture and equipment 7,221 5,674 5,238Vehicles 2,333 2,734 2,864Construction in progress — 599 131 Premises and equipment at cost 31,795 22,445 20,233Less: accumulated depreciation (10,137) (9,000) (8,425) Total premises and equipment, net 21,658$ 13,445$ 11,808$

The following is a schedule by year of future minimum lease payments on noncancelable operating leases as of December 31, 2013.

For the year ended December 31,

2014 664$2015 6792016 6962017 6582018 319

Later years 93Total minimum future payments 3,109$

(in thousands)

Note 7 – Other Property OwnedNet (gain) loss on other property owned as reflected in the accompanying Consolidated Statement of Comprehensive Income consisted of the following.


(Gain) loss on sale, net (1,358)$ (912)$ 404$Carrying value adjustments — 4,109 7,513Operating expense, net 199 52 900

(Gain) loss on other property owned, net (1,159)$ 3,249$ 8,817$

Note 8 – Note Payable to CoBank/AgBank

Farm Credit West's indebtedness to CoBank primarily represents borrowings by Farm Credit West to fund its loan portfolio. This indebtedness is collateralized by a pledge to CoBank of substantially all of Farm Credit West's assets, and is governed by a general financing agreement (GFA).According to the agreement, the aggregate outstanding amount of principal and accrued interest shall not at any time exceed the borrowing base (commitment amount). AtDecember 31, 2013 Farm Credit West’s borrowing base was

approximately $5.7 billion. The GFA is subject to renewal periodically in accordance with normal business practice and requires the Association to comply with certain covenants.Farm Credit West was in compliance with the terms and conditions of the GFA as of December 31, 2013.

As stated in Note 1, prior to the AgBank merger with CoBankon January 1, 2012, AgBank was the Association’s funding bank.

Substantially all borrower loans were match-funded with CoBank. Payments and disbursements were made on the note payable to CoBank on the same basis the Association collects payments from and disburses on borrower loans. The interest rate may periodically be adjusted by CoBank based on the terms and conditions of the borrowing. The weighted average interest rate was 1.35% for the year-ended December 31, 2013. The GFA matures on May 31, 2018.The Association expects renewal of the GFA at that time.

Under the Farm Credit Act, Farm Credit West is obligated to borrow only from CoBank, unless CoBank gives approval to borrow elsewhere. CoBank, consistent with Systemregulations, has established limitations on the Association’s ability to borrow funds based on specified factors or formulas relating primarily to credit quality and financial condition. At December 31, 2013, the Association’s note payable waswithin the specified limitations.

Note 9 – Members’ Equity

Descriptions of Farm Credit West's capitalization requirements, capital protection mechanisms, regulatory capitalization requirements and restrictions, and equities areprovided below.

Common Equity Investment Requirement – Capital Stock and Participation Certificates

In accordance with Farm Credit West’s capitalization bylaws, as a condition of borrowing, each borrower is required to make a common equity investment in capital stock (for agricultural producers) or participation certificates (for non-producers). Those capitalization bylaws allow stock requirements to range from (1) the lesser of $1 thousand or two percent of the amount of the loan to (2) 7% of the loan. The Board of Directors has the authority to change the common equity requirement as long as the change is within this range. At December 31, 2013 (and for all periods presented in the Consolidated Balance Sheet), the required investment was $1 thousand per voting stockholder. Customers with multiple loans under common control satisfy their equity ownership requirement with a single $1 thousand cash investment. Farm Credit West may require shareholders to subscribe to additional common equity to meet minimum System capital adequacy regulations.

Farm Credit West retains a first lien on the stock or participation certificates owned by borrowers. In accordance



general voting rights to their owners. Voting stock may not be transferred to another person unless such person is eligible to hold voting stock. At December 31, 2013, Farm Credit West had 733,515 shares of class C capital stock and 62,155 shares of class F participation certificates outstanding, all at a par value of five dollars per share/unit.

Under certain circumstances, Farm Credit West is also authorized to issue class A common stock. No such stock has been outstanding in the past three years.

Unallocated Retained Earnings

Net income can be distributed annually in the form of cash or allocated retained earnings; it may also be retained as unallocated retained earnings. Thus, unallocated retained earnings include patronage-sourced net income that is retained each year. The Board must approve any use of unallocated retained earnings.

Any net losses, to the extent they exceed any contingency reserve and unallocated retained earnings shall, except as otherwise provided in the Farm Credit Act, be treated as impairing: first, unallocated retained earnings evidenced by nonqualified written notices of allocation; second, allocated retained earnings evidenced by qualified written notices of allocation in the reverse order of issuance until all such allocated retained earnings has been impaired; third, to all classes of common stock and participation certificates until fully impaired; and fourth, to preferred stock until fully impaired.

In the event of liquidation or dissolution of Farm Credit West, any assets remaining after payment or retirement of all liabilities shall be distributed in the following order of priority. First, to the holders, pro rata, of all classes of preferred stock until an amount equal to the aggregate par value of all such shares then issued and outstanding has been distributed to such holders. Second, to the holders, pro rata, of all classes of common stock and participation certificates, until an amount equal to the aggregate par value of all such shares then issued and outstanding has been distributed to such holders. Third, to the holders of allocated retained earnings evidenced by qualified written notices of allocation. Fourth, to the holders of unallocated retained earnings evidenced by nonqualified written notices of allocation. Fifth, any remaining assets after such distributions shall be distributed to present and former patrons on a patronage basis, to the extent practicable.

Patronage Distributions

Consistent with its bylaws which provide for the allocation of patronage dividends, Farm Credit West operates under Subchapter T of the Internal Revenue code (i.e., the Association operates as a cooperative). All patronage distributions to a borrower are on such proportionate patronage basis as may be approved by the Board.

Farm Credit West allocates 100% of its patronage-sourced income before income taxes, less preferred stock dividends paid, to its patrons. At each year-end, the Board evaluates whether to retain Farm Credit West’s net income to strengthen its capital position or to distribute a portion of the net income to customers by declaring a qualified/cash patronage dividend. That portion of Farm Credit West’s patronage-sourced income before income taxes, less preferred stock dividends paid, not distributed in cash is also allocated to patrons. In accordance with Internal Revenue Service requirements, each customer is sent a nonqualified written notice of allocation. Allocated, but not distributed patronage dividends, are included in Farm Credit West’s unallocated retained earnings account and, in accordance with generally accepted accounting principles, are reported as unallocated retained earnings on the accompanying Consolidated Balance Sheet and Consolidated Statement of Changes in Members’ Equity. Such allocations may provide a future basis for a distribution of capital. The Farm Credit West Board considers these unallocated retained earnings to be permanently invested in the Association. As such, there is no current plan to revolve or redeem these amounts. No express or implied right to have such capital retired or revolved at any time is granted.

The Board approved a cash patronage distribution of $53.0 million out of 2013 patronage-sourced income before income taxes of $156.3 million; that $53.0 million is to be paid in early 2014. The Board approved a cash patronage distribution of $51.0 million out of 2012 patronage-sourced income before income taxes of $151.3 million; that $51.0 million was paid in early 2013. The Board approved a cash patronage distribution of $33.0 million out of 2011 patronage-sourced income before income taxes of $142.0 million; that $33.0 million was paid in early 2012. A cash patronage distribution of $32.0 million was paid in early 2011.

Accumulated Other Comprehensive Income

Farm Credit West reports other comprehensive income (loss) as a component of comprehensive income in the accompanying Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Members’ Equity and accumulated other comprehensive income as a component of retained earnings in the accompanying Consolidated Balance Sheet.

For the years ended December 31, 2013, December 31, 2012, and December 31, 2011, other comprehensive income (loss) results from two sources. First, Farm Credit West records other comprehensive income (loss) based on the market value of the Association’s investment securities – available-for-sale. In addition, as described in Note 12, the pension-related other comprehensive loss resulted primarily from the unrecognized net actuarial loss component of the Pension Restoration Plan liability.


with the Farm Credit Act, such equities are unprotected and at-risk. Retirement of at-risk equities will be solely at the discretion of the Board of Directors, or by Farm Credit West’s president when consistent with authority delegated by the Board. Such retirements will generally be at the lower of par or book value. Repayment of a loan does not automatically result in retirement of the corresponding common equity investment.

Regulatory Capitalization Requirements and Restrictions

FCA capital adequacy regulations require Farm Credit West to maintain permanent capital of seven percent of average risk-adjusted assets and off-balance-sheet commitments. Failure to meet the seven percent capital requirement can initiate certain mandatory and possibly additional discretionary actions by FCA that, if undertaken, could have a direct material effect on Farm Credit West’s financial statements. Farm Credit West is prohibited from reducing permanent capital by retiring stock or making certain other distributions to shareholders unless the prescribed capital standard is met. FCA regulations also require that other additional minimum capital standards be maintained. These standards require all System institutions to achieve and maintain ratios of total surplus as a percentage of average risk-adjusted assets of 7% and of core surplus as a percentage of average risk-adjusted assets of 3.5%. At December 31, 2013, Farm Credit West's permanent capital, total surplus, and core surplus ratios were 18.62%, 14.46%, and 14.35%, respectively.

A System regulation empowers FCA to direct a transfer of funds or equities by one or more System institutions to another System institution under specified circumstances. This regulation has not been utilized to date. Farm Credit West has not been called upon to initiate any transfers and is not aware of any proposed action under this regulation.

Description of Equities

Preferred Stock

Farm Credit West is authorized to issue and have outstanding up to 500 million shares of class H preferred stock. Purchases may be made by individuals or entities that hold, at the time of their purchase of preferred stock, legal title to, or beneficial interest in, shares of any class of Farm Credit West common stock or participation certificates. Farm Credit West retains a first lien on the preferred stock owned by members and such equities are unprotected and at-risk in accordance with the Farm Credit Act. Retirement of preferred stock upon the holder’s request is at the sole discretion of the Board, or by Farm Credit West’s president when consistent with authority delegated by the Board.

Holders of preferred stock are entitled to vote on amendments to the Bylaws that would affect a preference accorded to the preferred stock. Each customer’s initial subscription must be

for a minimum of $5 thousand. No subscription to a single investor will exceed 5% of the prior month end’s outstanding preferred stock balance. In accordance with Board policy, at December 31, 2013, the maximum new investment was $4 million, although a higher limit was allowable. The $4 million limit was put in place to promote equitable use of the program among stockholders.

Dividends on each share of preferred stock accrue on a daily basis at the dividend rate on the par value of such share. Preferred stock dividends will accrue whether or not they have been declared and whether or not there are profits, retained earnings, or other funds of Farm Credit West legally available for the payment of dividends. Accrued dividends will accumulate (up to and including the date of payment thereof) until declared and paid. Dividends are declared in the order accrued (i.e., oldest first), but will not be payable unless and until declared by the Board. The Board is not under any obligation to declare and pay dividends annually or on any other periodic basis. Accrued but unpaid dividends will not bear interest, nor will dividends accrue on unpaid accrued dividends. Dividends may only be declared and paid out of undistributed and unallocated net earnings of Farm Credit West, and then only if, after such declaration or payment, Farm Credit West will meet minimum prescribed regulatory capital adequacy requirements. So long as any shares of preferred stock are outstanding, Farm Credit West may not pay or declare any dividend on any class of its capital stock or distribute any patronage dividends, unless all accrued dividends on preferred stock as of the end of the most recent calendar month shall have been paid or declared and a sum set aside in payment thereof.

The dividend rate is a per annum rate which is subject to change each calendar month. For any particular month, the dividend rate shall not exceed 8% nor be less than the federal funds rate. At December 31, 2013 and throughout 2013, the preferred stock dividend rate was 2.00%. The average preferred stock dividend rate was 2.00% in 2012 and 2.42% in 2011.

All shares approved for retirement will be retired at an amount equal to the share’s par value, plus accrued but unpaid dividends. In addition, Farm Credit West may “call” (retire) all or any portion of a holder’s preferred stock at any time for the preferred stock’s par value plus accrued but unpaid dividends.

Preferred stock is a component of permanent capital, but may not exceed 25% of calculated permanent capital. Preferred stock is not surplus and is not included in total or core surplus for regulatory capital ratio calculation purposes.

Common Equity Outstanding – Class C Capital Stock and Class F Participation Certificates

Each owner of class C capital stock is entitled to a single vote. Other classes of borrower equities do not provide



general voting rights to their owners. Voting stock may not be transferred to another person unless such person is eligible to hold voting stock. At December 31, 2013, Farm Credit West had 733,515 shares of class C capital stock and 62,155 shares of class F participation certificates outstanding, all at a par value of five dollars per share/unit.

Under certain circumstances, Farm Credit West is also authorized to issue class A common stock. No such stock has been outstanding in the past three years.

Unallocated Retained Earnings

Net income can be distributed annually in the form of cash or allocated retained earnings; it may also be retained as unallocated retained earnings. Thus, unallocated retained earnings include patronage-sourced net income that is retained each year. The Board must approve any use of unallocated retained earnings.

Any net losses, to the extent they exceed any contingency reserve and unallocated retained earnings shall, except as otherwise provided in the Farm Credit Act, be treated as impairing: first, unallocated retained earnings evidenced by nonqualified written notices of allocation; second, allocated retained earnings evidenced by qualified written notices of allocation in the reverse order of issuance until all such allocated retained earnings has been impaired; third, to all classes of common stock and participation certificates until fully impaired; and fourth, to preferred stock until fully impaired.

In the event of liquidation or dissolution of Farm Credit West, any assets remaining after payment or retirement of all liabilities shall be distributed in the following order of priority. First, to the holders, pro rata, of all classes of preferred stock until an amount equal to the aggregate par value of all such shares then issued and outstanding has been distributed to such holders. Second, to the holders, pro rata, of all classes of common stock and participation certificates, until an amount equal to the aggregate par value of all such shares then issued and outstanding has been distributed to such holders. Third, to the holders of allocated retained earnings evidenced by qualified written notices of allocation. Fourth, to the holders of unallocated retained earnings evidenced by nonqualified written notices of allocation. Fifth, any remaining assets after such distributions shall be distributed to present and former patrons on a patronage basis, to the extent practicable.

Patronage Distributions

Consistent with its bylaws which provide for the allocation of patronage dividends, Farm Credit West operates under Subchapter T of the Internal Revenue code (i.e., the Association operates as a cooperative). All patronage distributions to a borrower are on such proportionate patronage basis as may be approved by the Board.

Farm Credit West allocates 100% of its patronage-sourced income before income taxes, less preferred stock dividends paid, to its patrons. At each year-end, the Board evaluates whether to retain Farm Credit West’s net income to strengthen its capital position or to distribute a portion of the net income to customers by declaring a qualified/cash patronage dividend. That portion of Farm Credit West’s patronage-sourced income before income taxes, less preferred stock dividends paid, not distributed in cash is also allocated to patrons. In accordance with Internal Revenue Service requirements, each customer is sent a nonqualified written notice of allocation. Allocated, but not distributed patronage dividends, are included in Farm Credit West’s unallocated retained earnings account and, in accordance with generally accepted accounting principles, are reported as unallocated retained earnings on the accompanying Consolidated Balance Sheet and Consolidated Statement of Changes in Members’ Equity. Such allocations may provide a future basis for a distribution of capital. The Farm Credit West Board considers these unallocated retained earnings to be permanently invested in the Association. As such, there is no current plan to revolve or redeem these amounts. No express or implied right to have such capital retired or revolved at any time is granted.

The Board approved a cash patronage distribution of $53.0 million out of 2013 patronage-sourced income before income taxes of $156.3 million; that $53.0 million is to be paid in early 2014. The Board approved a cash patronage distribution of $51.0 million out of 2012 patronage-sourced income before income taxes of $151.3 million; that $51.0 million was paid in early 2013. The Board approved a cash patronage distribution of $33.0 million out of 2011 patronage-sourced income before income taxes of $142.0 million; that $33.0 million was paid in early 2012. A cash patronage distribution of $32.0 million was paid in early 2011.

Accumulated Other Comprehensive Income

Farm Credit West reports other comprehensive income (loss) as a component of comprehensive income in the accompanying Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Members’ Equity and accumulated other comprehensive income as a component of retained earnings in the accompanying Consolidated Balance Sheet.

For the years ended December 31, 2013, December 31, 2012, and December 31, 2011, other comprehensive income (loss) results from two sources. First, Farm Credit West records other comprehensive income (loss) based on the market value of the Association’s investment securities – available-for-sale. In addition, as described in Note 12, the pension-related other comprehensive loss resulted primarily from the unrecognized net actuarial loss component of the Pension Restoration Plan liability.


with the Farm Credit Act, such equities are unprotected and at-risk. Retirement of at-risk equities will be solely at the discretion of the Board of Directors, or by Farm Credit West’s president when consistent with authority delegated by the Board. Such retirements will generally be at the lower of par or book value. Repayment of a loan does not automatically result in retirement of the corresponding common equity investment.

Regulatory Capitalization Requirements and Restrictions

FCA capital adequacy regulations require Farm Credit West to maintain permanent capital of seven percent of average risk-adjusted assets and off-balance-sheet commitments. Failure to meet the seven percent capital requirement can initiate certain mandatory and possibly additional discretionary actions by FCA that, if undertaken, could have a direct material effect on Farm Credit West’s financial statements. Farm Credit West is prohibited from reducing permanent capital by retiring stock or making certain other distributions to shareholders unless the prescribed capital standard is met. FCA regulations also require that other additional minimum capital standards be maintained. These standards require all System institutions to achieve and maintain ratios of total surplus as a percentage of average risk-adjusted assets of 7% and of core surplus as a percentage of average risk-adjusted assets of 3.5%. At December 31, 2013, Farm Credit West's permanent capital, total surplus, and core surplus ratios were 18.62%, 14.46%, and 14.35%, respectively.

A System regulation empowers FCA to direct a transfer of funds or equities by one or more System institutions to another System institution under specified circumstances. This regulation has not been utilized to date. Farm Credit West has not been called upon to initiate any transfers and is not aware of any proposed action under this regulation.

Description of Equities

Preferred Stock

Farm Credit West is authorized to issue and have outstanding up to 500 million shares of class H preferred stock. Purchases may be made by individuals or entities that hold, at the time of their purchase of preferred stock, legal title to, or beneficial interest in, shares of any class of Farm Credit West common stock or participation certificates. Farm Credit West retains a first lien on the preferred stock owned by members and such equities are unprotected and at-risk in accordance with the Farm Credit Act. Retirement of preferred stock upon the holder’s request is at the sole discretion of the Board, or by Farm Credit West’s president when consistent with authority delegated by the Board.

Holders of preferred stock are entitled to vote on amendments to the Bylaws that would affect a preference accorded to the preferred stock. Each customer’s initial subscription must be

for a minimum of $5 thousand. No subscription to a single investor will exceed 5% of the prior month end’s outstanding preferred stock balance. In accordance with Board policy, at December 31, 2013, the maximum new investment was $4 million, although a higher limit was allowable. The $4 million limit was put in place to promote equitable use of the program among stockholders.

Dividends on each share of preferred stock accrue on a daily basis at the dividend rate on the par value of such share. Preferred stock dividends will accrue whether or not they have been declared and whether or not there are profits, retained earnings, or other funds of Farm Credit West legally available for the payment of dividends. Accrued dividends will accumulate (up to and including the date of payment thereof) until declared and paid. Dividends are declared in the order accrued (i.e., oldest first), but will not be payable unless and until declared by the Board. The Board is not under any obligation to declare and pay dividends annually or on any other periodic basis. Accrued but unpaid dividends will not bear interest, nor will dividends accrue on unpaid accrued dividends. Dividends may only be declared and paid out of undistributed and unallocated net earnings of Farm Credit West, and then only if, after such declaration or payment, Farm Credit West will meet minimum prescribed regulatory capital adequacy requirements. So long as any shares of preferred stock are outstanding, Farm Credit West may not pay or declare any dividend on any class of its capital stock or distribute any patronage dividends, unless all accrued dividends on preferred stock as of the end of the most recent calendar month shall have been paid or declared and a sum set aside in payment thereof.

The dividend rate is a per annum rate which is subject to change each calendar month. For any particular month, the dividend rate shall not exceed 8% nor be less than the federal funds rate. At December 31, 2013 and throughout 2013, the preferred stock dividend rate was 2.00%. The average preferred stock dividend rate was 2.00% in 2012 and 2.42% in 2011.

All shares approved for retirement will be retired at an amount equal to the share’s par value, plus accrued but unpaid dividends. In addition, Farm Credit West may “call” (retire) all or any portion of a holder’s preferred stock at any time for the preferred stock’s par value plus accrued but unpaid dividends.

Preferred stock is a component of permanent capital, but may not exceed 25% of calculated permanent capital. Preferred stock is not surplus and is not included in total or core surplus for regulatory capital ratio calculation purposes.

Common Equity Outstanding – Class C Capital Stock and Class F Participation Certificates

Each owner of class C capital stock is entitled to a single vote. Other classes of borrower equities do not provide



Deferred tax assets and liabilities are comprised of the following at the dates indicated.


Deferred tax assets: Allowance for loan losses 7,691$ 7,260$ 7,046$ Unrealized losses on other property owned — 3,095 2,811 Nonaccrual income 1,538 1,459 1,014 Loss carryforwards 2,966 310 231 Gross deferred tax assets 12,195 12,124 11,102 Less: valuation allowance (8,407) (7,387) (289) Deferred tax assets, net of valuation allowance 3,788 4,737 10,813

Deferred tax liabilities: Lease adjustment (1,114) (2,128) (8,746) Patronage distribution from AgBank — — (1,358) Patronage distribution from CoBank (2,674) (2,609) (697) Other — — (12) Gross deferred tax liabilities (3,788) (4,737) (10,813)

Net deferred tax liability —$ —$ —$

During 2012, Farm Credit West changed the tax-basis income recognition method for the leasing portfolio. The cumulative effect of the change reduced the lease-related deferred tax liability by $5.7 million.

Farm Credit West has no uncertain tax positions to be recognized as of December 31, 2013, 2012, or 2011.

The Association recognizes interest and penalties related to unrecognized tax positions as an adjustment to income tax expense. The tax years that remain open for federal and major state income tax jurisdictions are 2009 and forward.

Pursuant to its bylaws, the Farm Credit West (and subsidiaries) Board has maintained in effect patronage resolutions that, subject to first making other bylaw-required applications (including the setting aside of necessary and appropriate additions to unallocated retained earnings), call for Farm Credit West to be operated as a cooperative utilizing a patronage program. In years when operational circumstances allow, patronage allocations will be declared based on that year’s results with payment occurring early in the following year. See the Patronage Distributions section of Note 9 for a history of patronage declarations and payments.

Note 12 – Employee Benefit Plans

Certain Farm Credit West employees participate in a multi-employer defined benefit retirement plan (Defined Benefit Plan). The Department of Labor has determined the plan to be a governmental plan; therefore, the plan is not subject to

the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). As the plan is not subject to ERISA, the plan’s benefits are not insured by the Pension Benefit Guaranty Corporation. Accordingly, the amount of accumulated benefits that participants would receive in the event of the plan’s termination is contingent on the sufficiency of the plan’s net assets to provide benefits at that time. This is a noncontributory plan which covers eligible employees. Benefits are based on salary and years of service.

The multi-employer Defined Benefit Plan reflects an unfunded liability totaling $50.8 million at December 31, 2013. The pension benefits funding status reflects the net of the fair value of the plan assets and the projected benefit obligation. The projected benefit obligation of the plan was $207.8 million at December 31, 2013, $219.4 million at December 31, 2012, and $216.3 million at December 31, 2011. The fair value of the plan assets was $157.0 million at December 31, 2013, $141.0 million at December 31, 2012,and $143.6 million at December 31, 2011.

Defined Benefit Plan costs are determined for each individual employer based on costs directly related to their current employees as well as an allocation of the remaining costs based proportionately on the estimated projected liability of the employer under the plan. Farm Credit West recognizes its proportional share of expense and contributes itsproportional share of funding. Total plan expense for participating employers was $3.3 million in 2013,$8.8 million in 2012, and $1.8 million in 2011. The Association’s allocated share of plan expenses included in salaries and employee benefits was $0.8 million in 2013,$0.8 million in 2012, and $0.5 million in 2011. Participating employers contributed $4.0 million in 2013, $5.7 million in 2012, and $ 0.2 million in 2011 to the plan. The Association’s allocated share of these pension contributions was $1.0 million in 2013, $1.4 million in 2012, and $0.1 million in 2011. While the plan is a governmental plan and is not subject to minimum funding requirements, the employers contribute amounts necessary on an actuarial basis to provide the plan with sufficient assets to meet the benefits to be paid to participants. There are no planned employer contributions expected to be paid into the pension plan during 2014.

Eligible current and retired employees of Farm Credit West are provided postretirement benefits other than pensions through the Farm Credit Foundations Retiree Medical Planand Retiree Life Plan. Benefits provided are determined on a graduated scale, based on years of service. The anticipated costs of these benefits are accrued during the period of the employee’s active service. Postretirement benefits (primarily health care benefits) included in salaries and employee benefits expense were less than $0.1 million in each of 2013,2012, and 2011. These expenses are equal to Farm Credit West’s cash contributions for each year.


The following is a summary of accumulated other comprehensive income included in the Consolidated Balance Sheet.


Unrealized gain on investment securities – available-for-sale 5,067$ 6,144$ 7,478$

(2,028) (2,081) (1,166) Accumulated other comprehensive income 3,039$ 4,063$ 6,312$

Unrecognized net actuarial loss and unrecognized prior service credit on Pension Restoration Plan

Note 10 – Patronage Distributions from Farm Credit Institutions

Patronage income recognized from Farm Credit institutions follows.


CoBank/AgBank 28,190$ 27,880$ 42,993$Other Farm Credit institutions 1,010 715 306 Total patronage income 29,200$ 28,595$ 43,299$

Patronage distributions from CoBank relating to the Association’s average direct note borrowings are distributed in cash. For CoBank patronage relating to average participated loan volume, a portion of the annual patronage isdistributed in cash and the remainder in the form of allocated equity.

The amount earned in December 2013 was accrued and will be paid by CoBank in March 2014. The amount earned and accrued in 2012 was paid by CoBank in March 2013. The amount declared in December 2011 by AgBank was accrued in 2011 and was paid in March 2012 by CoBank. Patronage received in March 2011 was recognized as received.

Note 11 – Income Taxes

The provision for (benefit from) income taxes follows.


Current federal tax provision 98$ 105$ 49$Current state tax provision 31 29 26Deferred federal tax benefit — — (753)

Provision for (benefit from) income taxes 129$ 134$ (678)$

The provision for (benefit from) income tax differs from the amount of income tax determined by applying the applicable U. S. statutory federal income tax rate to pretax income as quantified in the following table.


Federal tax at statutory rate 53,238$ 51,546$ 59,898$State tax, net 21 19 17Effect of non-taxable FLCA subsidiary (35,120) (41,153) (45,977)Patronage distribution declared by taxable entities (18,020) (17,340) (11,220)AgBank recapitalization distribution — — (3,670)Increase in deferred tax asset valuation allowance 1,020 7,098 289Prior year tax adjustments — 11 (15)Other (1,010) (47) —


As detailed in the following table, deferred tax assets and liabilities are established considering the commitment of the Farm Credit West Board and management to make operating decisions that will utilize such deferred tax assets. The Association recorded a valuation allowance of $8.4 million in 2013 and $7.4 million in 2012. The Association will continue to evaluate the realizability of the deferred tax assets and adjust the valuation allowance accordingly.



Deferred tax assets and liabilities are comprised of the following at the dates indicated.


Deferred tax assets: Allowance for loan losses 7,691$ 7,260$ 7,046$ Unrealized losses on other property owned — 3,095 2,811 Nonaccrual income 1,538 1,459 1,014 Loss carryforwards 2,966 310 231 Gross deferred tax assets 12,195 12,124 11,102 Less: valuation allowance (8,407) (7,387) (289) Deferred tax assets, net of valuation allowance 3,788 4,737 10,813

Deferred tax liabilities: Lease adjustment (1,114) (2,128) (8,746) Patronage distribution from AgBank — — (1,358) Patronage distribution from CoBank (2,674) (2,609) (697) Other — — (12) Gross deferred tax liabilities (3,788) (4,737) (10,813)

Net deferred tax liability —$ —$ —$

During 2012, Farm Credit West changed the tax-basis income recognition method for the leasing portfolio. The cumulative effect of the change reduced the lease-related deferred tax liability by $5.7 million.

Farm Credit West has no uncertain tax positions to be recognized as of December 31, 2013, 2012, or 2011.

The Association recognizes interest and penalties related to unrecognized tax positions as an adjustment to income tax expense. The tax years that remain open for federal and major state income tax jurisdictions are 2009 and forward.

Pursuant to its bylaws, the Farm Credit West (and subsidiaries) Board has maintained in effect patronage resolutions that, subject to first making other bylaw-required applications (including the setting aside of necessary and appropriate additions to unallocated retained earnings), call for Farm Credit West to be operated as a cooperative utilizing a patronage program. In years when operational circumstances allow, patronage allocations will be declared based on that year’s results with payment occurring early in the following year. See the Patronage Distributions section of Note 9 for a history of patronage declarations and payments.

Note 12 – Employee Benefit Plans

Certain Farm Credit West employees participate in a multi-employer defined benefit retirement plan (Defined Benefit Plan). The Department of Labor has determined the plan to be a governmental plan; therefore, the plan is not subject to

the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). As the plan is not subject to ERISA, the plan’s benefits are not insured by the Pension Benefit Guaranty Corporation. Accordingly, the amount of accumulated benefits that participants would receive in the event of the plan’s termination is contingent on the sufficiency of the plan’s net assets to provide benefits at that time. This is a noncontributory plan which covers eligible employees. Benefits are based on salary and years of service.

The multi-employer Defined Benefit Plan reflects an unfunded liability totaling $50.8 million at December 31, 2013. The pension benefits funding status reflects the net of the fair value of the plan assets and the projected benefit obligation. The projected benefit obligation of the plan was $207.8 million at December 31, 2013, $219.4 million at December 31, 2012, and $216.3 million at December 31, 2011. The fair value of the plan assets was $157.0 million at December 31, 2013, $141.0 million at December 31, 2012,and $143.6 million at December 31, 2011.

Defined Benefit Plan costs are determined for each individual employer based on costs directly related to their current employees as well as an allocation of the remaining costs based proportionately on the estimated projected liability of the employer under the plan. Farm Credit West recognizes its proportional share of expense and contributes itsproportional share of funding. Total plan expense for participating employers was $3.3 million in 2013,$8.8 million in 2012, and $1.8 million in 2011. The Association’s allocated share of plan expenses included in salaries and employee benefits was $0.8 million in 2013,$0.8 million in 2012, and $0.5 million in 2011. Participating employers contributed $4.0 million in 2013, $5.7 million in 2012, and $ 0.2 million in 2011 to the plan. The Association’s allocated share of these pension contributions was $1.0 million in 2013, $1.4 million in 2012, and $0.1 million in 2011. While the plan is a governmental plan and is not subject to minimum funding requirements, the employers contribute amounts necessary on an actuarial basis to provide the plan with sufficient assets to meet the benefits to be paid to participants. There are no planned employer contributions expected to be paid into the pension plan during 2014.

Eligible current and retired employees of Farm Credit West are provided postretirement benefits other than pensions through the Farm Credit Foundations Retiree Medical Planand Retiree Life Plan. Benefits provided are determined on a graduated scale, based on years of service. The anticipated costs of these benefits are accrued during the period of the employee’s active service. Postretirement benefits (primarily health care benefits) included in salaries and employee benefits expense were less than $0.1 million in each of 2013,2012, and 2011. These expenses are equal to Farm Credit West’s cash contributions for each year.


The following is a summary of accumulated other comprehensive income included in the Consolidated Balance Sheet.


Unrealized gain on investment securities – available-for-sale 5,067$ 6,144$ 7,478$

(2,028) (2,081) (1,166) Accumulated other comprehensive income 3,039$ 4,063$ 6,312$

Unrecognized net actuarial loss and unrecognized prior service credit on Pension Restoration Plan

Note 10 – Patronage Distributions from Farm Credit Institutions

Patronage income recognized from Farm Credit institutions follows.


CoBank/AgBank 28,190$ 27,880$ 42,993$Other Farm Credit institutions 1,010 715 306 Total patronage income 29,200$ 28,595$ 43,299$

Patronage distributions from CoBank relating to the Association’s average direct note borrowings are distributed in cash. For CoBank patronage relating to average participated loan volume, a portion of the annual patronage isdistributed in cash and the remainder in the form of allocated equity.

The amount earned in December 2013 was accrued and will be paid by CoBank in March 2014. The amount earned and accrued in 2012 was paid by CoBank in March 2013. The amount declared in December 2011 by AgBank was accrued in 2011 and was paid in March 2012 by CoBank. Patronage received in March 2011 was recognized as received.

Note 11 – Income Taxes

The provision for (benefit from) income taxes follows.


Current federal tax provision 98$ 105$ 49$Current state tax provision 31 29 26Deferred federal tax benefit — — (753)


The provision for (benefit from) income tax differs from the amount of income tax determined by applying the applicable U. S. statutory federal income tax rate to pretax income as quantified in the following table.


Federal tax at statutory rate 53,238$ 51,546$ 59,898$State tax, net 21 19 17Effect of non-taxable FLCA subsidiary (35,120) (41,153) (45,977)Patronage distribution declared by taxable entities (18,020) (17,340) (11,220)AgBank recapitalization distribution — — (3,670)Increase in deferred tax asset valuation allowance 1,020 7,098 289Prior year tax adjustments — 11 (15)Other (1,010) (47) —


As detailed in the following table, deferred tax assets and liabilities are established considering the commitment of the Farm Credit West Board and management to make operating decisions that will utilize such deferred tax assets. The Association recorded a valuation allowance of $8.4 million in 2013 and $7.4 million in 2012. The Association will continue to evaluate the realizability of the deferred tax assets and adjust the valuation allowance accordingly.



The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid.

(in thousands)

2014 844$2015 1,000$2016 1,001$2017 179$2018 2$

2019 through 2023 3,346$

Pension Restoration Benefits

Farm Credit West participates in the Farm Credit Foundations Defined Contribution Plan (Defined Contribution Plan). The Defined Contribution Plan has two components. Employees who do not participate in the Defined Benefit Plan may receive benefits through the Employer Contribution portion of the Defined Contribution Plan. In this plan, Farm Credit West provides a monthly contribution based on a defined percentage of the employee’s salary. Employees may also participate in a Salary Deferral Plan governed by Section 401(k) of the Internal Revenue Code. Farm Credit West matches a certain percentage of employee contributions. Employer contributions to the defined contribution plan were $1.7 million, $1.5 million, and $1.4 million for the years ended December 31, 2013, 2012, and 2011, respectively.

Note 13 – Related Party Transactions

In the ordinary course of business, Farm Credit West may enter into loan transactions with directors and full-time officers of Farm Credit West, directors and full-time officers of CoBank, the immediate families of such officers and directors, and other organizations with which such officers and directors may be affiliated. Such loans to directors and full-time officers are subject to special approval requirements contained in System regulations and are made on the same terms, including interest rates, amortization schedule, and collateral, as those prevailing at the time for comparable transactions with unrelated borrowers. (There were no loans outstanding to full-time officers at December 31, 2013.)

Information related to loans/leases and loans related to Farmer Mac-guaranteed securities made to such persons areshown below.


Loan funds advanced 186,219$ 174,683$ 131,032$Loan repayments 166,933$ 176,016$ 135,308$Ending loan balances 190,075$ 168,862$ 160,404$

In the opinion of management, none of these loans outstanding at December 31, 2013 involved more than a normal risk of collectability.

Farm Credit West has a director loan quality policy that, unless waived in specific instances ensuring Association safety and soundness, calls for a director to immediately resign and be ineligible for appointment, election, or reelection if that director is obligated to FCW on a loan that is subject to adverse circumstances. If a waiver is permissible, the director must prepare a signed corrective plan detailing plans to eliminate the adverse circumstance within a specified period. Additionally, Farm Credit West has an employeeloan quality policy calling for various authorities and responsibilities of an employee to be suspended if the employee is party to a loan that becomes delinquent or adversely classified.

The following table shows information related to the preferred stock holdings of Association directors.


Preferred stock issued 82$ 67$ 92$Preferred stock retired 2,260$ 20$ 56$Ending preferred stock balances 915$ 3,053$ 2,945$

Association employees are not eligible to hold preferred stock.

Farm Credit West also has business relationships with certain other System entities. During 2013, the Association paid $4.5 million to Financial Partners, Inc. for technology services and $0.2 million to Foundations for human resource services.

Farm Credit West Executive Vice President Ernest M. Hodges served on the Farmer Mac board of directors from 2005 through June 2012. As discussed in Note 2 and Note 4, Farm Credit West owns mortgage-backed securities resulting from the securitization of mortgage loans with Farmer Mac. As discussed in Note 3, Farm Credit West obtains credit enhancements from Farmer Mac in return for a reduction in loan yield.

During Mr. Hodges’ tenure on the board, Farmer Mac directors received stock options or restricted stock grants as part of their annual compensation. As part of an agreement with Farm Credit West, Mr. Hodges has assigned his entire interest in all Farmer Mac stock options and grants to the Association. During 2012, grants related to 3,485 shares of Farmer Mac stock were exercised, the shares were sold, and a gain of $0.1 million was recorded in other noninterest income on Farm Credit West’s Consolidated Statement of Comprehensive Income. During 2011, grants related to 4,099 shares were exercised, the shares were sold, and a gain of $0.1 million was recorded in other noninterest income. As of December 31, 2012, Farm Credit West no longer has a financial interest in any options, grants, or shares of stock relating to Mr. Hodges’ service on the Farmer Mac board.


Farm Credit West also participates in a non-qualified defined benefit plan (Pension Restoration Plan) that is unfunded. The purpose of this plan is to supplement a participant’s benefits under the Defined Benefit Plan to the extent that such benefits are reduced by the limitations imposed by the Internal Revenue Code. Benefits payable under the Pension Restoration Plan are offset by a reduction in the benefits payable from the Defined Benefit Plan. Pension Restoration Plan expenses included in salaries and employee benefits were $0.6 million in 2013, $0.4 million in 2012, and $0.7 million in 2011.

The funded status and the amounts recognized in Farm Credit West’s Consolidated Balance Sheet for the Pension Restoration Plan follow.


Change in benefit obligation: Beginning benefit obligation 4,427$ 3,985$ 3,995$ Service cost 101 68 227 Interest cost 179 201 214 Actuarial loss/(gain) 289 1,088 (356) Benefits paid (823) (915) (95) Ending benefit obligation 4,173 4,427 3,985

Change in plan assets: Company contributions 823 915 95 Benefits paid (823) (915) (95) Ending fair value of plan assets — — —

December 31 net amount recognized (accrued benefit liability) (4,173)$ (4,427)$ (3,985)$

Amounts included in accumulated other comprehensive lossfor the Pension Restoration Plan on Farm Credit West’s Consolidated Balance Sheet follow.


Unrecognized net actuarial loss 2,028$ 2,081$ 1,166$Unrecognized prior service credit — — —

Accumulated other comprehensive loss recognized 2,028$ 2,081$ 1,166$

An estimated net actuarial loss of $0.5 million for the Pension Restoration Plan will be amortized into income during 2014.

The projected benefit obligation and accumulated benefit obligation for the Pension Restoration Plan follow.


Projected benefit obligation 4,173$ 4,427$ 3,985$Accumulated benefit obligation 3,283$ 3,677$ 3,709$

Components of net periodic pension expense for the Pension Restoration Plan included in Farm Credit West’s Consolidated Statement of Comprehensive Income follow.


Service cost 101$ 68$ 227$Interest cost 179 201 214Net amortization and deferral 342 173 215

Net periodic benefit cost 622$ 442$ 656$

Changes in benefit obligation recognized in other comprehensive income/loss are included in the following table.


Current year net actuarial loss/(gain) 289$ 1,088$ (356)$Amortization of: Prior service credit — — 34 Net actuarial loss (342) (173) (249)

Total recognized in other comprehensive loss/(income) (53)$ 915$ (571)$

Weighted average assumptions used to determine benefit obligation follow.

December 31, 2013 2012 2011

Discount rate 4.85% 4.05% 5.05%Rate of compensation increase 4.50% 4.50% 4.50%

Weighted average assumptions used to determine net periodic benefit cost follow.

December 31, 2013 2012 2011


The Association expects to contribute $0.8 million to the Pension Restoration Plan in 2014.



The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid.

(in thousands)

2014 844$2015 1,000$2016 1,001$2017 179$2018 2$

2019 through 2023 3,346$

Pension Restoration Benefits

Farm Credit West participates in the Farm Credit Foundations Defined Contribution Plan (Defined Contribution Plan). The Defined Contribution Plan has two components. Employees who do not participate in the Defined Benefit Plan may receive benefits through the Employer Contribution portion of the Defined Contribution Plan. In this plan, Farm Credit West provides a monthly contribution based on a defined percentage of the employee’s salary. Employees may also participate in a Salary Deferral Plan governed by Section 401(k) of the Internal Revenue Code. Farm Credit West matches a certain percentage of employee contributions. Employer contributions to the defined contribution plan were $1.7 million, $1.5 million, and $1.4 million for the years ended December 31, 2013, 2012, and 2011, respectively.

Note 13 – Related Party Transactions

In the ordinary course of business, Farm Credit West may enter into loan transactions with directors and full-time officers of Farm Credit West, directors and full-time officers of CoBank, the immediate families of such officers and directors, and other organizations with which such officers and directors may be affiliated. Such loans to directors and full-time officers are subject to special approval requirements contained in System regulations and are made on the same terms, including interest rates, amortization schedule, and collateral, as those prevailing at the time for comparable transactions with unrelated borrowers. (There were no loans outstanding to full-time officers at December 31, 2013.)

Information related to loans/leases and loans related to Farmer Mac-guaranteed securities made to such persons areshown below.


Loan funds advanced 186,219$ 174,683$ 131,032$Loan repayments 166,933$ 176,016$ 135,308$Ending loan balances 190,075$ 168,862$ 160,404$

In the opinion of management, none of these loans outstanding at December 31, 2013 involved more than a normal risk of collectability.

Farm Credit West has a director loan quality policy that, unless waived in specific instances ensuring Association safety and soundness, calls for a director to immediately resign and be ineligible for appointment, election, or reelection if that director is obligated to FCW on a loan that is subject to adverse circumstances. If a waiver is permissible, the director must prepare a signed corrective plan detailing plans to eliminate the adverse circumstance within a specified period. Additionally, Farm Credit West has an employeeloan quality policy calling for various authorities and responsibilities of an employee to be suspended if the employee is party to a loan that becomes delinquent or adversely classified.

The following table shows information related to the preferred stock holdings of Association directors.


Preferred stock issued 82$ 67$ 92$Preferred stock retired 2,260$ 20$ 56$Ending preferred stock balances 915$ 3,053$ 2,945$

Association employees are not eligible to hold preferred stock.

Farm Credit West also has business relationships with certain other System entities. During 2013, the Association paid $4.5 million to Financial Partners, Inc. for technology services and $0.2 million to Foundations for human resource services.

Farm Credit West Executive Vice President Ernest M. Hodges served on the Farmer Mac board of directors from 2005 through June 2012. As discussed in Note 2 and Note 4, Farm Credit West owns mortgage-backed securities resulting from the securitization of mortgage loans with Farmer Mac. As discussed in Note 3, Farm Credit West obtains credit enhancements from Farmer Mac in return for a reduction in loan yield.

During Mr. Hodges’ tenure on the board, Farmer Mac directors received stock options or restricted stock grants as part of their annual compensation. As part of an agreement with Farm Credit West, Mr. Hodges has assigned his entire interest in all Farmer Mac stock options and grants to the Association. During 2012, grants related to 3,485 shares of Farmer Mac stock were exercised, the shares were sold, and a gain of $0.1 million was recorded in other noninterest income on Farm Credit West’s Consolidated Statement of Comprehensive Income. During 2011, grants related to 4,099 shares were exercised, the shares were sold, and a gain of $0.1 million was recorded in other noninterest income. As of December 31, 2012, Farm Credit West no longer has a financial interest in any options, grants, or shares of stock relating to Mr. Hodges’ service on the Farmer Mac board.


Farm Credit West also participates in a non-qualified defined benefit plan (Pension Restoration Plan) that is unfunded. The purpose of this plan is to supplement a participant’s benefits under the Defined Benefit Plan to the extent that such benefits are reduced by the limitations imposed by the Internal Revenue Code. Benefits payable under the Pension Restoration Plan are offset by a reduction in the benefits payable from the Defined Benefit Plan. Pension Restoration Plan expenses included in salaries and employee benefits were $0.6 million in 2013, $0.4 million in 2012, and $0.7 million in 2011.

The funded status and the amounts recognized in Farm Credit West’s Consolidated Balance Sheet for the Pension Restoration Plan follow.


Change in benefit obligation: Beginning benefit obligation 4,427$ 3,985$ 3,995$ Service cost 101 68 227 Interest cost 179 201 214 Actuarial loss/(gain) 289 1,088 (356) Benefits paid (823) (915) (95) Ending benefit obligation 4,173 4,427 3,985

Change in plan assets: Company contributions 823 915 95 Benefits paid (823) (915) (95) Ending fair value of plan assets — — —

December 31 net amount recognized (accrued benefit liability) (4,173)$ (4,427)$ (3,985)$

Amounts included in accumulated other comprehensive lossfor the Pension Restoration Plan on Farm Credit West’s Consolidated Balance Sheet follow.


Unrecognized net actuarial loss 2,028$ 2,081$ 1,166$Unrecognized prior service credit — — —

Accumulated other comprehensive loss recognized 2,028$ 2,081$ 1,166$

An estimated net actuarial loss of $0.5 million for the Pension Restoration Plan will be amortized into income during 2014.

The projected benefit obligation and accumulated benefit obligation for the Pension Restoration Plan follow.


Projected benefit obligation 4,173$ 4,427$ 3,985$Accumulated benefit obligation 3,283$ 3,677$ 3,709$

Components of net periodic pension expense for the Pension Restoration Plan included in Farm Credit West’s Consolidated Statement of Comprehensive Income follow.


Service cost 101$ 68$ 227$Interest cost 179 201 214Net amortization and deferral 342 173 215

Net periodic benefit cost 622$ 442$ 656$

Changes in benefit obligation recognized in other comprehensive income/loss are included in the following table.


Current year net actuarial loss/(gain) 289$ 1,088$ (356)$Amortization of: Prior service credit — — 34 Net actuarial loss (342) (173) (249)

Total recognized in other comprehensive loss/(income) (53)$ 915$ (571)$

Weighted average assumptions used to determine benefit obligation follow.

December 31, 2013 2012 2011


Weighted average assumptions used to determine net periodic benefit cost follow.

December 31, 2013 2012 2011


The Association expects to contribute $0.8 million to the Pension Restoration Plan in 2014.



measured at fair value on a non-recurring basis for the periods presented.

Total NetFair Value (Losses) Gain

Measurement Using Total IncurredSignificant Unobservable Fair During

(in thousands) Inputs (Level 3) Value the Year

Assets:

December 31, 2013 29,357$ 29,357$ (8,011)$ December 31, 2012 34,188 34,188 (14,044) December 31, 2011 52,978 52,978 (19,674)

December 31, 2013 10,782$ 10,782$ 1,358$ December 31, 2012 29,970 29,970 (3,197) December 31, 2011 66,969 66,969 (7,917)

Nonaccrual loans, net of related specific allowance

Other property owned, appraised value

Valuation TechniquesAs more fully discussed in Note 2, accounting guidanceestablishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following represents a brief summary of the valuation techniques used by Farm Credit West for assets and liabilities subject to fair value measurement.

Investment Securities: Where quoted prices are available in an active market, available-for-sale securities would be classified as Level 1. If quoted prices are not available in an active market, the fair value of securities are estimated using pricing models, quoted prices for similar securities received from pricing services or discounted cash flows. Generally, these securities would be classified as Level 2. This would include certain mortgage-backed and asset-backed securities. Where there is limited activity or less transparency around inputs to the valuation, the securities are classified as Level 3. Securities classified as Level 3 include Farm Credit West’s mortgage-backed securities issued by the Federal Agricultural Mortgage Corporation, the valuation of which involves significant unobservable inputs. Farm Credit West values its investment securities – available-for-sale by determining the present value of that security using a comparison of (a) the existing interest rates on its securitized loans to (b) the current, adjusted market interest rate for securities with similar characteristics, and valuing accordingly.

Loans: For certain loans evaluated for impairment, the fair value was based on the underlying collateral for collateral-dependent loans. At December 31, 2013, substantially all of the Association’s impaired loans that are recorded at fair value are secured by real estate. The fair value measurement process uses appraisals performed by independent licensed

appraisers and other market-based information, but in many cases it also requires significant input based on management’s knowledge of and judgment about current market conditions, specific issues relating to the collateral and other matters. As a result, these fair value measurements fall within Level 3 of the hierarchy. When the value of the real estate, less estimated costs to sell, is less than the principal balance of the loan, a specific reserve is established in order to recognize the fair value. Impaired loans are reviewed and evaluated periodically for additional impairment, and reserves are adjusted accordingly.

Other Property Owned: With regard to impaired loans and other property owned, it is not practicable to provide specific information on inputs as each collateral property is unique. The process for measuring the fair value of other property owned involves the use of appraisals or other market-based information. As a result, these fair value measurements fall within Level 3 of the hierarchy. Costs to sell represent transaction costs and are not included as a component of the asset’s fair value.

Note 17 – Disclosures about Fair Value of Financial InstrumentsThe following tables present the carrying amounts and fair values of Farm Credit West's financial instruments at December 31, 2013, 2012, and 2011. Quoted market prices are generally not available for certain financial instruments, as described below. Accordingly, fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates involve uncertainties and matters of judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.


Note 14 – Regulatory Enforcement Matters

There are no regulatory enforcement actions in effect for Farm Credit West.

Note 15 – Commitments and Contingencies

Farm Credit West has various commitments outstanding and contingent liabilities.

Farm Credit West may participate in financial instruments with off-balance sheet risk to satisfy the financing needs of its borrowers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the financial statements.

Commitments to extend credit are agreements to lend to a borrower as long as there is not a violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 2013, $2.1 billionin commitments to extend credit were outstanding; $25.5 million of those commitments were associated with standby letters of credit.

Since many of these commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. However, these credit-related financial instruments have off-balance-sheet credit risk because their amounts are not reflected on Farm Credit West’s Consolidated Balance Sheet until funded or drawn upon.

Farm Credit West participates in standby letters of credit to satisfy the financing needs of its borrowers. These letters of credit are irrevocable agreements to guarantee payment of specified financial obligations. Farm Credit West’s agreement to guarantee is supported by a commitment to repay Farm Credit West from the borrower on whose behalf the letter of credit was issued. At December 31, 2013,$25.5 million of standby letters of credit were outstanding. Given the borrower obligations that support these letters of credit, combined with the modest marginal fees charged and modest marginal expenses incurred in their extension, management deems these standby letters of credit to have no fair value. At December 31, 2013, $18.0 million of those letters of credit expire in 2014; $0.7 million expire in 2015,$6.1 million expire in 2016 and $0.7 million expire in 2017 .

The credit risk associated with issuing commitments and letters of credit is substantially the same as that involved in extending loans to borrowers. Management applies the same credit policies to these instruments. Upon fully funding an instrument, the credit risk amounts are equal to the contract amounts and the potential for loss from such transactions is subject to borrower repayment or the value of collateral securing the loan (if any). The amount of collateral obtained,

if deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower. Farm Credit West does not anticipate any material losses as a result of these commitment or letter of credit transactions.

In the ordinary course of business Farm Credit West may be party to legal claims in which monetary damages are asserted. Management is unaware of any pending claims for which the ultimate liability would have a material effect on Farm Credit West’s financial position or results of operations.

Note 16 – Fair Value Measurements

Accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The fair value measurement is not an indication of liquidity. See Note 2 for additional information. During the three years presented, the Association recorded no transfer in or out of levels 1,2 or 3. Assets measured at fair value on a recurring basis for each of the fair value hierarchy values are summarized below. There were no other assets and no liabilities measured at fair value on a recurring basis for the periods presented.

Fair ValueMeasurement Using

Significant Unobservable(in thousands) Inputs (Level 3) Total Fair Value

Assets: Investment securities – available-for-sale December 31, 2013 150,673$ 150,673$ December 31, 2012 171,442 171,442 December 31, 2011 202,944 202,944

The table below represents a reconciliation of Farm Credit West’s investment securities – available-for-sale measured at fair value on a recurring basis for each of past three years.

Fair Value Measurement UsingSignificant Unobservable Inputs (Level 3)Investment securities – available-for-sale

(in thousands) 2013 2012 2011


Unrealized losses included in other comprehensive loss (1,077) (1,334) (267) Settlements (19,692) (30,168) (32,206)

Balance at December 31 150,673$ 171,442$ 202,944$

Assets measured at fair value on a non-recurring basis for each of the fair value hierarchy values are summarized in the following table. There were no other assets and no liabilities



measured at fair value on a non-recurring basis for the periods presented.

Total NetFair Value (Losses) Gain

Measurement Using Total IncurredSignificant Unobservable Fair During

(in thousands) Inputs (Level 3) Value the Year

Assets:

December 31, 2013 29,357$ 29,357$ (8,011)$ December 31, 2012 34,188 34,188 (14,044) December 31, 2011 52,978 52,978 (19,674)

December 31, 2013 10,782$ 10,782$ 1,358$ December 31, 2012 29,970 29,970 (3,197) December 31, 2011 66,969 66,969 (7,917)

Nonaccrual loans, net of related specific allowance

Other property owned, appraised value

Valuation TechniquesAs more fully discussed in Note 2, accounting guidanceestablishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following represents a brief summary of the valuation techniques used by Farm Credit West for assets and liabilities subject to fair value measurement.

Investment Securities: Where quoted prices are available in an active market, available-for-sale securities would be classified as Level 1. If quoted prices are not available in an active market, the fair value of securities are estimated using pricing models, quoted prices for similar securities received from pricing services or discounted cash flows. Generally, these securities would be classified as Level 2. This would include certain mortgage-backed and asset-backed securities. Where there is limited activity or less transparency around inputs to the valuation, the securities are classified as Level 3. Securities classified as Level 3 include Farm Credit West’s mortgage-backed securities issued by the Federal Agricultural Mortgage Corporation, the valuation of which involves significant unobservable inputs. Farm Credit West values its investment securities – available-for-sale by determining the present value of that security using a comparison of (a) the existing interest rates on its securitized loans to (b) the current, adjusted market interest rate for securities with similar characteristics, and valuing accordingly.

Loans: For certain loans evaluated for impairment, the fair value was based on the underlying collateral for collateral-dependent loans. At December 31, 2013, substantially all of the Association’s impaired loans that are recorded at fair value are secured by real estate. The fair value measurement process uses appraisals performed by independent licensed

appraisers and other market-based information, but in many cases it also requires significant input based on management’s knowledge of and judgment about current market conditions, specific issues relating to the collateral and other matters. As a result, these fair value measurements fall within Level 3 of the hierarchy. When the value of the real estate, less estimated costs to sell, is less than the principal balance of the loan, a specific reserve is established in order to recognize the fair value. Impaired loans are reviewed and evaluated periodically for additional impairment, and reserves are adjusted accordingly.

Other Property Owned: With regard to impaired loans and other property owned, it is not practicable to provide specific information on inputs as each collateral property is unique. The process for measuring the fair value of other property owned involves the use of appraisals or other market-based information. As a result, these fair value measurements fall within Level 3 of the hierarchy. Costs to sell represent transaction costs and are not included as a component of the asset’s fair value.

Note 17 – Disclosures about Fair Value of Financial InstrumentsThe following tables present the carrying amounts and fair values of Farm Credit West's financial instruments at December 31, 2013, 2012, and 2011. Quoted market prices are generally not available for certain financial instruments, as described below. Accordingly, fair values are based on judgments regarding anticipated cash flows, future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates involve uncertainties and matters of judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.


Note 14 – Regulatory Enforcement Matters

There are no regulatory enforcement actions in effect for Farm Credit West.

Note 15 – Commitments and Contingencies

Farm Credit West has various commitments outstanding and contingent liabilities.

Farm Credit West may participate in financial instruments with off-balance sheet risk to satisfy the financing needs of its borrowers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the financial statements.

Commitments to extend credit are agreements to lend to a borrower as long as there is not a violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. At December 31, 2013, $2.1 billionin commitments to extend credit were outstanding; $25.5 million of those commitments were associated with standby letters of credit.

Since many of these commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements. However, these credit-related financial instruments have off-balance-sheet credit risk because their amounts are not reflected on Farm Credit West’s Consolidated Balance Sheet until funded or drawn upon.

Farm Credit West participates in standby letters of credit to satisfy the financing needs of its borrowers. These letters of credit are irrevocable agreements to guarantee payment of specified financial obligations. Farm Credit West’s agreement to guarantee is supported by a commitment to repay Farm Credit West from the borrower on whose behalf the letter of credit was issued. At December 31, 2013,$25.5 million of standby letters of credit were outstanding. Given the borrower obligations that support these letters of credit, combined with the modest marginal fees charged and modest marginal expenses incurred in their extension, management deems these standby letters of credit to have no fair value. At December 31, 2013, $18.0 million of those letters of credit expire in 2014; $0.7 million expire in 2015,$6.1 million expire in 2016 and $0.7 million expire in 2017 .

The credit risk associated with issuing commitments and letters of credit is substantially the same as that involved in extending loans to borrowers. Management applies the same credit policies to these instruments. Upon fully funding an instrument, the credit risk amounts are equal to the contract amounts and the potential for loss from such transactions is subject to borrower repayment or the value of collateral securing the loan (if any). The amount of collateral obtained,

if deemed necessary upon extension of credit, is based on management’s credit evaluation of the borrower. Farm Credit West does not anticipate any material losses as a result of these commitment or letter of credit transactions.

In the ordinary course of business Farm Credit West may be party to legal claims in which monetary damages are asserted. Management is unaware of any pending claims for which the ultimate liability would have a material effect on Farm Credit West’s financial position or results of operations.

Note 16 – Fair Value Measurements

Accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. The fair value measurement is not an indication of liquidity. See Note 2 for additional information. During the three years presented, the Association recorded no transfer in or out of levels 1,2 or 3. Assets measured at fair value on a recurring basis for each of the fair value hierarchy values are summarized below. There were no other assets and no liabilities measured at fair value on a recurring basis for the periods presented.

Fair ValueMeasurement Using

Significant Unobservable(in thousands) Inputs (Level 3) Total Fair Value

Assets: Investment securities – available-for-sale December 31, 2013 150,673$ 150,673$ December 31, 2012 171,442 171,442 December 31, 2011 202,944 202,944

The table below represents a reconciliation of Farm Credit West’s investment securities – available-for-sale measured at fair value on a recurring basis for each of past three years.

Fair Value Measurement UsingSignificant Unobservable Inputs (Level 3)Investment securities – available-for-sale

(in thousands) 2013 2012 2011


Unrealized losses included in other comprehensive loss (1,077) (1,334) (267) Settlements (19,692) (30,168) (32,206)

Balance at December 31 150,673$ 171,442$ 202,944$

Assets measured at fair value on a non-recurring basis for each of the fair value hierarchy values are summarized in the following table. There were no other assets and no liabilities


Disclosure Information Required by Farm Credit Administration Regulations

Description of Business The description of the territory served, persons eligible to borrow, types of lending activities engaged in and financial services offered, and related Farm Credit organizations required to be disclosed in this section is incorporated herein by reference from Note 1 to the financial statements included in this Annual Report. The description of significant developments that had or could have a material impact on earnings or interest rates to borrowers, acquisitions or dispositions of material assets, material changes in the manner of conducting the business, seasonal characteristics, and concentrations of assets, if any, required to be disclosed in this section is incorporated herein by reference from “Management’s Discussion and Analysis” included in this Annual Report.

Legal Proceedings Information required to be disclosed in this section is incorporated herein by reference from Note 15 to the financial statements included in this Annual Report.

Description of Capital Structure Information required to be disclosed in this section is incorporated herein by reference from Note 9 to the financial statements included in this Annual Report.

Description of Liabilities The description of debt outstanding required to be disclosed in this section is incorporated herein by reference from Note 8 to the financial statements included in this Annual Report. The description of contingent liabilities required to be disclosed in this section is incorporated herein by reference from Notes 1 and 15 to the financial statements in this Annual Report.

Selected Financial Data The selected financial data for the five years ended December 31, 2013 required to be disclosed in this section is incorporated herein by reference from the “Five-Year Summary of Selected Financial Data” in this Annual Report.

Management’s Discussion and Analysis “Management’s Discussion and Analysis” in this Annual Report is required to be disclosed in this section and is incorporated herein by reference.

Board of Directors’ Charter, Code of Ethics, and Independence The Farm Credit West Board of Directors has adopted a Charter to support the Board’s leadership and oversight role in the accomplishment of the Association’s mission. Also, the Board has adopted a Code of Ethics, whereby the Board and each director commit to conduct business in accordance with the highest ethical standards. In accordance with the

Farm Credit West Board of Directors’ Charter, annually the Corporate Governance Committee determines the independence of each director (as defined in the subject Charter). Evaluating each situation using established “independence” criteria, the Board has determined each Farm Credit West director to be “independent” in accordance with those criteria. Both the Charter and Code of Ethics documents can be viewed on the Farm Credit West web site (www.farmcreditwest.com).

Board Committees Farm Credit West maintains four committees that are primarily composed of directors: a Corporate Governance Committee, an Audit Committee, an Enterprise Risk Management Committee, and a Human Capital and Compensation/Evaluation Committee. The members of those committees are identified in the director disclosures below. The full Board considers these committees to have the range of expertise and experience to meet their responsibilities.

Corporate Governance Committee Farm Credit West’s Corporate Governance Committee is comprised of the chairman of the Board of Directors (who also chairs this Corporate Governance Committee), the vice chairman of the Board, the prior chairman of the Board, the chairs of the Audit Committee, Enterprise Risk Management Committee and Human Capital and Compensation/Evaluation Committee, and the President & CEO. The Corporate Governance Committee meets as needed to act on broad issues, typically when the full board is not available to meet. A copy of the Corporate Governance Committee Charter can be viewed on the Farm Credit West web site (www.farmcreditwest.com).

Human Capital and Compensation/Evaluation Committee Farm Credit West’s Human Capital and Compensation/ Evaluation Committee meets as needed to address broad compensation and evaluation issues. These responsibilities include, but are not limited to, annually reviewing/approving Farm Credit West’s incentive compensation programs, establishing performance standards for the President & CEO, and conducting the President and CEO’s performance evaluation. A copy of the Human Capital and Compensation/Evaluation Committee Charter can be obtained by members upon request.

Enterprise Risk Management Committee Farm Credit West’s Enterprise Risk Management Committee meets as needed to provide oversight for the majority of the enterprise risk management practices of the association. The committee reviews policies related to financial, information technology systems, credit and risk management. It also monitors compliance with those policies and recommends policy changes to the full Board. A copy of the Enterprise


The estimated fair values of Farm Credit West’s financial instruments follow.

Carrying FairDecember 31, (in thousands) Amount Value

Financial assets: Loans 6,414,566$ 6,376,924$ Allowance for loan losses (34,700) Net loans 6,379,866 6,376,924 Investment securities 200,188 202,190 Cash — —

Financial liabilities: Note payable to CoBank/AgBank 5,108,955$ 5,103,213$ Future payment funds 351,508 351,508 Commitments to extend credit — — Standby letters of credit — —

2013


Financial assets: Loans 6,078,186$ 6,134,728$ Allowance for loan losses (33,200) Net loans 6,044,986 6,134,728 Investment securities 230,926 233,116 Cash 35,878 35,878


2012




2011

Following is a description of the methods and assumptions used to estimate the fair value of each class of Farm Credit West’s financial instruments for which it is practicable to estimate that value.

LoansFair value is estimated by discounting the expected future cash flows using Farm Credit West's current interest rates at which similar loans would be made to borrowers with similar credit risk. The discount rates are based on the District’s current loan origination rates as well as Farm Credit West’sestimates of credit risk. Management has no basis to determine whether the estimated fair values presented would be indicative of the assumptions and adjustments that a purchaser of Farm Credit West’s loans would seek in an actual sale.

For purposes of determining fair value of accruing loans, the loan portfolio is segregated into pools of loans with similar characteristics. Expected future cash flows and interest rates reflecting appropriate credit risk are separately determined for each individual pool.

Fair value of loans in a nonaccrual status is estimated as described above, with appropriately higher interest rates, which reflect the uncertainty of continued cash flows.

Investment SecuritiesFair value is estimated as described in Note 16. An active market does not exist for Farmer Mac agricultural mortgage-backed securities.

Cash and Future Funds PayableThe carrying value of cash and future funds payable is a reasonable estimate of fair value.

Note Payable to CoBank/AgBankThe note payable is segregated into pricing pools according to the types and terms of the loans (or other assets) which they fund. Fair value of the note payable is estimated by discounting the anticipated cash flows of each pricing pool using the current rate that would be charged for borrowings. For purposes of this estimate, it is assumed the cash flow on the note payable is equal to the principal payments on Farm Credit West’s loans receivable plus accrued interest on the note payable.

Commitments to Extend Credit and Standby Letters of CreditThe carrying value of loan commitments and standby letters of credit are a reasonable estimate of fair value. Farm Credit West assigns no carrying value to loan commitments or letters of credit. Substantially all standby letters of credit are associated with variable rate loan products. Substantially all fixed rate loan commitments expire within 30 days.

Note 18 – Subsequent EventsThe Association has evaluated subsequent events through March 10, 2014, which is the date the financial statements were issued. No material subsequent event items met the criteria for disclosure.



Description of Business The description of the territory served, persons eligible to borrow, types of lending activities engaged in and financial services offered, and related Farm Credit organizations required to be disclosed in this section is incorporated herein by reference from Note 1 to the financial statements included in this Annual Report. The description of significant developments that had or could have a material impact on earnings or interest rates to borrowers, acquisitions or dispositions of material assets, material changes in the manner of conducting the business, seasonal characteristics, and concentrations of assets, if any, required to be disclosed in this section is incorporated herein by reference from “Management’s Discussion and Analysis” included in this Annual Report.

Legal Proceedings Information required to be disclosed in this section is incorporated herein by reference from Note 15 to the financial statements included in this Annual Report.

Description of Capital Structure Information required to be disclosed in this section is incorporated herein by reference from Note 9 to the financial statements included in this Annual Report.

Description of Liabilities The description of debt outstanding required to be disclosed in this section is incorporated herein by reference from Note 8 to the financial statements included in this Annual Report. The description of contingent liabilities required to be disclosed in this section is incorporated herein by reference from Notes 1 and 15 to the financial statements in this Annual Report.

Selected Financial Data The selected financial data for the five years ended December 31, 2013 required to be disclosed in this section is incorporated herein by reference from the “Five-Year Summary of Selected Financial Data” in this Annual Report.

Management’s Discussion and Analysis “Management’s Discussion and Analysis” in this Annual Report is required to be disclosed in this section and is incorporated herein by reference.

Board of Directors’ Charter, Code of Ethics, and Independence The Farm Credit West Board of Directors has adopted a Charter to support the Board’s leadership and oversight role in the accomplishment of the Association’s mission. Also, the Board has adopted a Code of Ethics, whereby the Board and each director commit to conduct business in accordance with the highest ethical standards. In accordance with the

Farm Credit West Board of Directors’ Charter, annually the Corporate Governance Committee determines the independence of each director (as defined in the subject Charter). Evaluating each situation using established “independence” criteria, the Board has determined each Farm Credit West director to be “independent” in accordance with those criteria. Both the Charter and Code of Ethics documents can be viewed on the Farm Credit West web site (www.farmcreditwest.com).

Board Committees Farm Credit West maintains four committees that are primarily composed of directors: a Corporate Governance Committee, an Audit Committee, an Enterprise Risk Management Committee, and a Human Capital and Compensation/Evaluation Committee. The members of those committees are identified in the director disclosures below. The full Board considers these committees to have the range of expertise and experience to meet their responsibilities.

Corporate Governance Committee Farm Credit West’s Corporate Governance Committee is comprised of the chairman of the Board of Directors (who also chairs this Corporate Governance Committee), the vice chairman of the Board, the prior chairman of the Board, the chairs of the Audit Committee, Enterprise Risk Management Committee and Human Capital and Compensation/Evaluation Committee, and the President & CEO. The Corporate Governance Committee meets as needed to act on broad issues, typically when the full board is not available to meet. A copy of the Corporate Governance Committee Charter can be viewed on the Farm Credit West web site (www.farmcreditwest.com).

Human Capital and Compensation/Evaluation Committee Farm Credit West’s Human Capital and Compensation/ Evaluation Committee meets as needed to address broad compensation and evaluation issues. These responsibilities include, but are not limited to, annually reviewing/approving Farm Credit West’s incentive compensation programs, establishing performance standards for the President & CEO, and conducting the President and CEO’s performance evaluation. A copy of the Human Capital and Compensation/Evaluation Committee Charter can be obtained by members upon request.

Enterprise Risk Management Committee Farm Credit West’s Enterprise Risk Management Committee meets as needed to provide oversight for the majority of the enterprise risk management practices of the association. The committee reviews policies related to financial, information technology systems, credit and risk management. It also monitors compliance with those policies and recommends policy changes to the full Board. A copy of the Enterprise


The estimated fair values of Farm Credit West’s financial instruments follow.




2013


Financial assets: Loans 6,078,186$ 6,134,728$ Allowance for loan losses (33,200) Net loans 6,044,986 6,134,728 Investment securities 230,926 233,116 Cash 35,878 35,878


2012




2011

Following is a description of the methods and assumptions used to estimate the fair value of each class of Farm Credit West’s financial instruments for which it is practicable to estimate that value.

LoansFair value is estimated by discounting the expected future cash flows using Farm Credit West's current interest rates at which similar loans would be made to borrowers with similar credit risk. The discount rates are based on the District’s current loan origination rates as well as Farm Credit West’sestimates of credit risk. Management has no basis to determine whether the estimated fair values presented would be indicative of the assumptions and adjustments that a purchaser of Farm Credit West’s loans would seek in an actual sale.

For purposes of determining fair value of accruing loans, the loan portfolio is segregated into pools of loans with similar characteristics. Expected future cash flows and interest rates reflecting appropriate credit risk are separately determined for each individual pool.

Fair value of loans in a nonaccrual status is estimated as described above, with appropriately higher interest rates, which reflect the uncertainty of continued cash flows.

Investment SecuritiesFair value is estimated as described in Note 16. An active market does not exist for Farmer Mac agricultural mortgage-backed securities.

Cash and Future Funds PayableThe carrying value of cash and future funds payable is a reasonable estimate of fair value.

Note Payable to CoBank/AgBankThe note payable is segregated into pricing pools according to the types and terms of the loans (or other assets) which they fund. Fair value of the note payable is estimated by discounting the anticipated cash flows of each pricing pool using the current rate that would be charged for borrowings. For purposes of this estimate, it is assumed the cash flow on the note payable is equal to the principal payments on Farm Credit West’s loans receivable plus accrued interest on the note payable.

Commitments to Extend Credit and Standby Letters of CreditThe carrying value of loan commitments and standby letters of credit are a reasonable estimate of fair value. Farm Credit West assigns no carrying value to loan commitments or letters of credit. Substantially all standby letters of credit are associated with variable rate loan products. Substantially all fixed rate loan commitments expire within 30 days.

Note 18 – Subsequent EventsThe Association has evaluated subsequent events through March 10, 2014, which is the date the financial statements were issued. No material subsequent event items met the criteria for disclosure.



Richard J. Enns, Director Term of Office: Mr. Enns has served on the Board since 1995. His current term ends in 2015. During the past five years, Mr. Enns has owned and managed a farming operation raising almonds, vegetables and other irrigated field crops. Mr. Enns serves as vice chairman of the Farm Credit West Audit Committee. He also serves as a director of the Rosedale-Rio Bravo Water Storage District (a banker and distributor of irrigation water). In 2013, Mr. Enns served 17 days at Board and Board committee meetings and 5 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Douglas C. Filipponi, Director Term of Office: Mr. Filipponi has served on the Board since 2006. His current term ends in 2015. During the past five years, Mr. Filipponi has been president of Filipponi-Thompson Drilling, Inc. (which drills water wells) and managing partner of Margarita Vineyards, LLC and a member of Valor Wine Company, LLC (producer and marketer of wine grapes). He is also managing partner of Santa Margarita Cattle Company, LLC and owner-operator of Vaquero Water Ranch (a cow-calf ranch). He is co-owner and chief operating officer of Ancient Peaks Winery, Inc. Mr. Filipponi serves on the Farm Credit West Enterprise Risk Management Committee. In 2013, Mr. Filipponi served 17 days at Board and Board committee meetings and 11 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Adam B. Firestone, Director Term of Office: Mr. Firestone has served on the Board since 1997. His current term ends in 2017. During the past five years, Mr. Firestone has been involved in wine grape growing, as well as wine production and marketing. He has also been a practicing attorney. Mr. Firestone serves on the Farm Credit West Corporate Governance Committee and is chairman of the Farm Credit West Enterprise Risk Management Committee. Mr. Firestone is president of Grundoon LLC (which produces and markets wine and wine grapes), managing member of Firestone Walker, LLC (a brewer), and president of Pacific Conservation Company, LLC (a land holding company). He is a member of the California Bar Association. In 2013, Mr. Firestone served 15 days at Board and Board committee meetings and 5 days in other official activities on behalf of the Board, for which he was compensated $39,450.

Craig C. Gnos, Director Term of Office: Mr. Gnos has served on the Board since 2002. His current term ends in 2014. During the past five years, Mr. Gnos has been involved in the production of alfalfa, corn, cucumbers, tomatoes, squash, sunflowers, watermelons, and wheat at Batavia and E&H

Farms. Mr. Gnos also operates as Gnos Bros. Inc. and Batavia Inc. Mr. Gnos serves on the Solano County FSA Committee. Mr. Gnos serves on the Farm Credit West Human Capital and Compensation/Evaluation Committee. In 2013, Mr. Gnos served 15 days at Board and Board committee meetings and 4 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Robert N. Hansen, Director Term of Office: Mr. Hansen has served on the Board since 1999. His current term ends in 2016. During the past five years, Mr. Hansen has been a partner in Hansen Farms (which raises irrigated field crops) and 3-H Cattle Company (a custom cattle-raising feedlot operation). Mr. Hansen serves on the Farm Credit West Audit Committee. He also serves as a member of the CoBank Nominating Committee. He is chairman of the Duncan Reclamation District (which reclaims soil in the Corcoran area) as well as chairing the consolidated finance committee of Hanford Community Medical Center. Mr. Hansen is also a director of the Hanford Community Medical Center (a health care provider). In 2013, Mr. Hansen served 15 days at Board and Board committee meetings and 9 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Thomas R. Heenan, Director Term of Office: Mr. Heenan has served on the Board since 1990. His current term ends in 2015. During the past five years, Mr. Heenan has been a partner in Heenan Ranch growing peaches, prunes, walnuts and kiwi fruit. Mr. Heenan serves on the Farm Credit West Audit Committee. In 2013, Mr. Heenan served 17 days at Board and Board committee meetings and 14 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Barry T. Powell, Appointed Director Term of Office: Mr. Powell has served on the Board since 2007. His current term ends in 2017. During the past five years, Mr. Powell has been a financial consultant within the agricultural sector and also the executive vice president and chief financial officer of Calamco, a wholesale supply cooperative. Mr. Powell is presently self-employed as a financial and operational consultant within agriculture and non-profit. In addition, from August 2013 to present, he is CEO for North Valley Ag Services, a fertilizer cooperative. Mr. Powell serves on the board of Cresto Rey High School. Mr. Powell serves as chairman of the Farm Credit West Audit Committee and also serves on the Corporate Governance Committee. The Board has determined that he is an audit committee financial expert. In 2013, Mr. Powell served 17 days at Board and Board committee meetings and 7 days in other official activities on behalf of the Board, for which he was compensated $40,800.


Risk Management Committee Charter can be obtained by members upon request.

Audit Committee Farm Credit West’s Audit Committee manages the audit function as detailed in an internal audit policy and an Audit Committee charter. The Audit Committee charter calls for the Audit Committee to consist of at least four and no more than eight members of the Board. At least one Audit Committee member is designated a “financial expert” as defined in FCA regulations. All committee members are expected to have a practical knowledge of finance and accounting. A copy of the Audit Committee Charter can be obtained by members upon request. The primary functions of the Audit Committee are to: (1) assists the full Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process, and the process for monitoring compliance with laws/regulations; (2) pre-approves and oversees all auditing and non-audit services provided by independent auditors, and; (3) oversees the audit effort of the Association’s internal audit function. A report of Audit Committee activities is included in this Annual Report.

Directors

Farm Credit regulations require the disclosure of directors’ business experience for the last five years, other entities on whose board the director serves, compensation received as a Farm Credit West director, and certain other information. Compensation amounts are presented in whole dollars.

Blake Harlan, Chairman of the Board of Directors Term of Office: Mr. Harlan has served on the Board since 2003. His current term ends in 2017. During the past five years, Mr. Harlan has been president of Harlan Family Ranch., which farms processing tomatoes, alfalfa, wheat, corn, sunflowers and almonds. He also does business as Harlan Feed, which manufactures and distributes hay cubes to the livestock industry. Mr. Harlan is also a partner in Wilson Bend Farms, a rice operation in Colusa and Yolo Counties. Mr. Harlan serves as chairman of the Farm Credit West Board and Corporate Governance Committee. In 2013, Mr. Harlan served 17 days at Board and Board committee meetings and 10 days in other official activities on behalf of the Board, for which he was compensated $44,940.

Joseph C. (Joey) Airoso, Vice Chairman of the Board of Directors Term of Office: Mr. Airoso has served on the Board since 2007. His current term ends in 2018. During the past five years, Mr. Airoso has been involved in owning and operating a family-owned dairy and farm. Mr. Airoso serves as vice chairman of the Farm Credit West Board and Corporate Governance Committee. He is vice

chairman of the Tulare County Farm Bureau; Tulare Union High School Ag Advisory; College of Sequoias Ag Advisory; Central Valley Dairy Ground Water Monitoring Board; Pixley Irrigation Water Task Force; and Dairyman PAC. He also serves on the finance committee for St. John Catholic Church and CA Dairy Task Force. In 2013, Mr. Airoso served 15 days at Board and Board committee meetings and 10 days at other official activities on behalf of the Board, for which he was compensated $39,450.

Robert Amarel, Jr., Director Term of Office: Mr. Amarel has served on the Board since 2007. His current term ends in 2018. During the past five years, Mr. Amarel has managed Reason Farms, which is involved in growing prunes, walnuts, wheat and also owns commercial properties. Mr. Amarel serves on the Farm Credit West Human Capital and Compensation/ Evaluation Committee. He is also a director of Sunsweet Growers, a prune processing and marketing cooperative; the California Dried Plum Board-State Marketing Order; Prune Marketing Committee-Federal Marketing Order; and a Farm Bureau member ag spokesman. In 2013, Mr. Amarel served 17 days at Board and Board committee meetings and 10 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Alben F. Barkley, Appointed Director Term of Office: Mr. Barkley has served on the Board since 1991. His current term ends in 2016. During the past five years, Mr. Barkley has been involved in the management of commercial insurance companies/ agencies. Mr. Barkley serves on the Farm Credit West Human Capital and Compensation/Evaluation Committee. He is president of Barkley Insurance & Risk Management Services. In 2013, Mr. Barkley served 14 days at Board and Board committee meetings and 3 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Gregory O. (Butch) Dias, Jr., Director Term of Office: Mr. Dias has served on the Board since 2000. His current term ends in 2014. During the past five years, Mr. Dias has been involved in Delta View Farms, a dairy and farm operated by him and his two sons. Mr. Dias serves on the Farm Credit West Human Capital and Compensation/Evaluation Committee. Mr. Dias is also a director of the California Jersey Cattle Association (which promotes Jersey breed improvement) and chairman of the California Dairy Foods Research Foundation. In 2013, Mr. Dias served 17 days at Board and Board committee meetings and 8 days in other official activities on behalf of the Board, for which he was compensated $35,400.



Richard J. Enns, Director Term of Office: Mr. Enns has served on the Board since 1995. His current term ends in 2015. During the past five years, Mr. Enns has owned and managed a farming operation raising almonds, vegetables and other irrigated field crops. Mr. Enns serves as vice chairman of the Farm Credit West Audit Committee. He also serves as a director of the Rosedale-Rio Bravo Water Storage District (a banker and distributor of irrigation water). In 2013, Mr. Enns served 17 days at Board and Board committee meetings and 5 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Douglas C. Filipponi, Director Term of Office: Mr. Filipponi has served on the Board since 2006. His current term ends in 2015. During the past five years, Mr. Filipponi has been president of Filipponi-Thompson Drilling, Inc. (which drills water wells) and managing partner of Margarita Vineyards, LLC and a member of Valor Wine Company, LLC (producer and marketer of wine grapes). He is also managing partner of Santa Margarita Cattle Company, LLC and owner-operator of Vaquero Water Ranch (a cow-calf ranch). He is co-owner and chief operating officer of Ancient Peaks Winery, Inc. Mr. Filipponi serves on the Farm Credit West Enterprise Risk Management Committee. In 2013, Mr. Filipponi served 17 days at Board and Board committee meetings and 11 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Adam B. Firestone, Director Term of Office: Mr. Firestone has served on the Board since 1997. His current term ends in 2017. During the past five years, Mr. Firestone has been involved in wine grape growing, as well as wine production and marketing. He has also been a practicing attorney. Mr. Firestone serves on the Farm Credit West Corporate Governance Committee and is chairman of the Farm Credit West Enterprise Risk Management Committee. Mr. Firestone is president of Grundoon LLC (which produces and markets wine and wine grapes), managing member of Firestone Walker, LLC (a brewer), and president of Pacific Conservation Company, LLC (a land holding company). He is a member of the California Bar Association. In 2013, Mr. Firestone served 15 days at Board and Board committee meetings and 5 days in other official activities on behalf of the Board, for which he was compensated $39,450.

Craig C. Gnos, Director Term of Office: Mr. Gnos has served on the Board since 2002. His current term ends in 2014. During the past five years, Mr. Gnos has been involved in the production of alfalfa, corn, cucumbers, tomatoes, squash, sunflowers, watermelons, and wheat at Batavia and E&H

Farms. Mr. Gnos also operates as Gnos Bros. Inc. and Batavia Inc. Mr. Gnos serves on the Solano County FSA Committee. Mr. Gnos serves on the Farm Credit West Human Capital and Compensation/Evaluation Committee. In 2013, Mr. Gnos served 15 days at Board and Board committee meetings and 4 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Robert N. Hansen, Director Term of Office: Mr. Hansen has served on the Board since 1999. His current term ends in 2016. During the past five years, Mr. Hansen has been a partner in Hansen Farms (which raises irrigated field crops) and 3-H Cattle Company (a custom cattle-raising feedlot operation). Mr. Hansen serves on the Farm Credit West Audit Committee. He also serves as a member of the CoBank Nominating Committee. He is chairman of the Duncan Reclamation District (which reclaims soil in the Corcoran area) as well as chairing the consolidated finance committee of Hanford Community Medical Center. Mr. Hansen is also a director of the Hanford Community Medical Center (a health care provider). In 2013, Mr. Hansen served 15 days at Board and Board committee meetings and 9 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Thomas R. Heenan, Director Term of Office: Mr. Heenan has served on the Board since 1990. His current term ends in 2015. During the past five years, Mr. Heenan has been a partner in Heenan Ranch growing peaches, prunes, walnuts and kiwi fruit. Mr. Heenan serves on the Farm Credit West Audit Committee. In 2013, Mr. Heenan served 17 days at Board and Board committee meetings and 14 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Barry T. Powell, Appointed Director Term of Office: Mr. Powell has served on the Board since 2007. His current term ends in 2017. During the past five years, Mr. Powell has been a financial consultant within the agricultural sector and also the executive vice president and chief financial officer of Calamco, a wholesale supply cooperative. Mr. Powell is presently self-employed as a financial and operational consultant within agriculture and non-profit. In addition, from August 2013 to present, he is CEO for North Valley Ag Services, a fertilizer cooperative. Mr. Powell serves on the board of Cresto Rey High School. Mr. Powell serves as chairman of the Farm Credit West Audit Committee and also serves on the Corporate Governance Committee. The Board has determined that he is an audit committee financial expert. In 2013, Mr. Powell served 17 days at Board and Board committee meetings and 7 days in other official activities on behalf of the Board, for which he was compensated $40,800.


Risk Management Committee Charter can be obtained by members upon request.

Audit Committee Farm Credit West’s Audit Committee manages the audit function as detailed in an internal audit policy and an Audit Committee charter. The Audit Committee charter calls for the Audit Committee to consist of at least four and no more than eight members of the Board. At least one Audit Committee member is designated a “financial expert” as defined in FCA regulations. All committee members are expected to have a practical knowledge of finance and accounting. A copy of the Audit Committee Charter can be obtained by members upon request. The primary functions of the Audit Committee are to: (1) assists the full Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal control, the audit process, and the process for monitoring compliance with laws/regulations; (2) pre-approves and oversees all auditing and non-audit services provided by independent auditors, and; (3) oversees the audit effort of the Association’s internal audit function. A report of Audit Committee activities is included in this Annual Report.

Directors

Farm Credit regulations require the disclosure of directors’ business experience for the last five years, other entities on whose board the director serves, compensation received as a Farm Credit West director, and certain other information. Compensation amounts are presented in whole dollars.

Blake Harlan, Chairman of the Board of Directors Term of Office: Mr. Harlan has served on the Board since 2003. His current term ends in 2017. During the past five years, Mr. Harlan has been president of Harlan Family Ranch., which farms processing tomatoes, alfalfa, wheat, corn, sunflowers and almonds. He also does business as Harlan Feed, which manufactures and distributes hay cubes to the livestock industry. Mr. Harlan is also a partner in Wilson Bend Farms, a rice operation in Colusa and Yolo Counties. Mr. Harlan serves as chairman of the Farm Credit West Board and Corporate Governance Committee. In 2013, Mr. Harlan served 17 days at Board and Board committee meetings and 10 days in other official activities on behalf of the Board, for which he was compensated $44,940.

Joseph C. (Joey) Airoso, Vice Chairman of the Board of Directors Term of Office: Mr. Airoso has served on the Board since 2007. His current term ends in 2018. During the past five years, Mr. Airoso has been involved in owning and operating a family-owned dairy and farm. Mr. Airoso serves as vice chairman of the Farm Credit West Board and Corporate Governance Committee. He is vice

chairman of the Tulare County Farm Bureau; Tulare Union High School Ag Advisory; College of Sequoias Ag Advisory; Central Valley Dairy Ground Water Monitoring Board; Pixley Irrigation Water Task Force; and Dairyman PAC. He also serves on the finance committee for St. John Catholic Church and CA Dairy Task Force. In 2013, Mr. Airoso served 15 days at Board and Board committee meetings and 10 days at other official activities on behalf of the Board, for which he was compensated $39,450.

Robert Amarel, Jr., Director Term of Office: Mr. Amarel has served on the Board since 2007. His current term ends in 2018. During the past five years, Mr. Amarel has managed Reason Farms, which is involved in growing prunes, walnuts, wheat and also owns commercial properties. Mr. Amarel serves on the Farm Credit West Human Capital and Compensation/ Evaluation Committee. He is also a director of Sunsweet Growers, a prune processing and marketing cooperative; the California Dried Plum Board-State Marketing Order; Prune Marketing Committee-Federal Marketing Order; and a Farm Bureau member ag spokesman. In 2013, Mr. Amarel served 17 days at Board and Board committee meetings and 10 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Alben F. Barkley, Appointed Director Term of Office: Mr. Barkley has served on the Board since 1991. His current term ends in 2016. During the past five years, Mr. Barkley has been involved in the management of commercial insurance companies/ agencies. Mr. Barkley serves on the Farm Credit West Human Capital and Compensation/Evaluation Committee. He is president of Barkley Insurance & Risk Management Services. In 2013, Mr. Barkley served 14 days at Board and Board committee meetings and 3 days in other official activities on behalf of the Board, for which he was compensated $35,400.

Gregory O. (Butch) Dias, Jr., Director Term of Office: Mr. Dias has served on the Board since 2000. His current term ends in 2014. During the past five years, Mr. Dias has been involved in Delta View Farms, a dairy and farm operated by him and his two sons. Mr. Dias serves on the Farm Credit West Human Capital and Compensation/Evaluation Committee. Mr. Dias is also a director of the California Jersey Cattle Association (which promotes Jersey breed improvement) and chairman of the California Dairy Foods Research Foundation. In 2013, Mr. Dias served 17 days at Board and Board committee meetings and 8 days in other official activities on behalf of the Board, for which he was compensated $35,400.



Chris N. Brumfield, Executive Vice President –General Counsel & Corporate SecretaryMr. Brumfield has served in his current position sinceJanuary 2011. Prior to that, he served as Senior Vice Presi-dent-General Counsel since the founding of Farm Credit West in 2001. He has been employed in the Farm Credit System since 1988, except for an 18-month period from 1991 to 1993.

Christopher J. Doherty, Executive Vice President –Fiscal Operations & Chief Financial OfficerMr. Doherty has served in his current position since January 2012. Prior to that, he served as Senior Vice President and Chief Financial Officer since November 2008. He has been employed in the Farm Credit System since 1987, except for afour year period from 2005 to 2008. Mr. Doherty is a Certified Public Accountant (CPA).

Ernest M. Hodges, Executive Vice President –Legislative & Public RelationsMr. Hodges has served in his current position since January, 2014. Prior to that he served as Executive Vice President –Administrative Operations & Chief Information Officer since May 2008. He has been employed in the Farm Credit System since 1973, except for a 24 month period from 1976 to 1978. Mr. Hodges serves as a trustee of Woodland Health CareFoundation, which provides financial support to Woodland Health C6are. He also serves on the California State Fair Agricultural Advisory Council.

William M. Noland, Executive Vice President – ChiefOperating Officer & Chief Risk OfficerMr. Noland has served in his current position since January 2014. Prior to that, he served as an executive vice president and senior vice president of Credit Operations since the founding of Farm Credit West in 2001. He has been employed in the Farm Credit System since 1981. Mr. Noland serves on the Agribusiness Advisory Council for California Polytechnic State University, San Luis Obispo.

Daniel R. Clawson, Senior Vice President – Credit Operations & Chief Credit OfficerMr. Clawson has served in his current position since January, 2014. Prior to that he served as a regional vice president or senior vice president in credit operations since 2008. He has been employed in the Farm Credit System since 1986.

Melanie Johnson, Senior Vice President – Director of Internal AuditMs. Johnson has served in her current position since January 2012. Prior to that she served as Vice President – Assistant Director of Internal Audit since September 2009, and beforethat she was a senior manager for PricewaterhouseCoopers,LLP. Ms. Johnson is a Certified Internal Auditor (CIA) and a Certified Public Accountant (CPA).

Chris Roche, Senior Vice President – Chief Human Resource OfficerMs. Roche has served in her current position since May 2011.From 2006 to 2011, she was a human resources manager for Aerojet Inc., an aerospace and defense contractor. Ms. Roche was also previously employed in the Farm Credit Systemfrom 1993 to 2002 as a human resources director.

Transactions with Senior Officers and DirectorsFarm Credit West’s policies on loans to and transactions with its full-time officers and directors, required to be disclosed in this section, are incorporated herein by reference from Note 13 to the financial statements included in this Annual Report. At December 31, 2013, no loans to Farm Credit West directors or full-time officers, CoBank directors or full-time officers, their immediate families, or affiliated organizations involved more than a normal risk of collectability.

Director and Officer Preferred Stock OwnershipThe following table shows information related to the preferred stock holdings of Association directors.

Farm Credit West has a comprehensive policy dealing with the equitable issuance and retirement of its class H preferred stock. The average preferred stock dividend rate for 2013was 2.00% for all preferred stockholders. Farm Credit West preferred stock policy prohibits ownership of preferred stock by Association employees.

Involvement of Directors and Officers in Certain Legal ProceedingsThere were no matters which came to the attention of management or the Board of Directors regarding involvement of current directors or full-time officers in specified legal proceedings which are required to be disclosed in this section.

Relationship with CoBankThe financial condition and results of operations of CoBank materially affect stockholder investments in Farm Credit West. Copies of the CoBank Annual Report and copies of CoBank’s most recent quarterly financial report are available from Farm Credit West free of charge.

For the year ended December 31, 2013 Year-end (in thousands) Balance Issued Retired

Robert E. Amarel Jr. 108$ —$ —$Gregory O. Dias Jr. 106 12 —Douglas C. Filipponi 110 — (1,800)Robert N. Hansen 398 40 (250)Thomas R. Heenan 193 30 (210) Total 915$ 82$ (2,260)$

Preferred Stock


Edgar A. Terry, Director Term of Office: Mr. Terry has served on the Board since 1992. His current term ends in 2014. During the past five years, Mr. Terry has been involved in vegetable and strawberry production/marketing and has been a Senior Adjunct at California Lutheran University. Mr. Terry serves on the Farm Credit West Corporate Governance Committee and Enterprise Risk Management Committee. He is President of Terry Farms, Inc. (which produces and markets vegetables and strawberries); President of Willal, Inc. (Sales and Marketing); President of Crop Genius, Inc (software development and sales); Vice President of Rancho Adobe, Inc. (lessor and lessee of farmland). Mr. Terry serves on the boards of Terry Farms Inc.; Central AP (real estate partnership); and JJE Managing Partner (real estate management); and Rancho Adobe, Inc. He also serves as the Chairman of the Center for Economic Research and Forecasting, Vice Chairman of the California Strawberry Commission and the Ventura County Fair Foundation and is on the Advisory Board of the Ventura Agricultural Historical Museum. In 2013, Mr. Terry served 17 days at Board and Board committee meetings and 5 days in other official activities on behalf of the Board, for which he was compensated $38,130.

Sureena B. Thiara, Director Term of Office: Mrs. Thiara has served on the Board since 2005. Her current term ends in 2016. During the past five years, Mrs. Thiara has been a partner in Far Horizon Insurance Partnership. She is also a partner in Manseena Orchards Partnership, which leases the family farm of 145 acres of prunes and walnuts, and Pulp Papery. She has also been a crop insurance agent for over 16 years. Mrs. Thiara serves as vice chairman of the Farm Credit West Enterprise Risk Management Committee. In 2013, Mrs. Thiara served 14 days at Board and Board committee meetings and 6 days in other official activities on behalf of the Board, for which she was compensated $35,400.

Cornelius (Case) Van Wingerden, Director Term of Office: Mr. Van Wingerden has served on the Board since 1987. His current term ends in 2018. During the past five years, Mr. Van Wingerden has been involved in the production, shipping, and marketing of fresh cut flower bouquets, potted orchid plants and living lettuce and herbs to supermarkets nationwide. He is a director of Westland Floral Company (producer of fresh cut flowers and potted orchid plants), GroLink Plant Company, Inc./Athena Brazil (propagator of vegetative cuttings), Floral Ambiance, Inc. (shipper of consumer-direct floral gifts), Gallup & Stribling Orchids, LLC (orchid producer), FCCL (refrigerated floral transportation) and Alexander Ranch, Inc. (producer of living lettuce and herbs). Mr. Van Wingerden serves as chairman of the Farm Credit West Human Capital and

Compensation/Evaluation Committee and also serves on the Corporate Governance Committee. In 2013, Mr. Van Wingerden served 17 days at Board and Board committee meetings and 7 days in other official activities on behalf of the Board, for which he was compensated $41,800.

Director Compensation, Travel, Subsistence, and Other Related Expenses Director compensation is under the oversight of the Board’s Human Capital and Compensation/Evaluation Committee. During 2013, each Farm Credit West director was compensated based on an annual retainer paid in monthly installments. The 2013 compensation rates based on position were as follows: Board chair - $46,300; the Board vice chair and Board committee chairs - $40,850; and, all other directors - $35,410. The total compensation Farm Credit West paid all directors for 2013 amounted to $563,000. Directors, senior officers, and other staff are reimbursed reasonable costs of essential travel, subsistence, and other related expenses. A copy of the policy authorizing such reimbursements is available to shareholders upon request. The total amount of reimbursements to directors for travel, subsistence, and other related expenses totaled $59,000, $75,000, and $57,000 in 2013, 2012, and 2011, respectively.

Senior Officers

Farm Credit regulations also require the disclosure of the business experience for the last five years for each senior officer. Required senior officer compensation information is included in Farm Credit West’s Annual Meeting Information Statement, which is available for public inspection at the Association’s offices.

Mark D. Littlefield, President and Chief Executive Officer Mr. Littlefield has served in his current position since January 2011. Prior to that, he served as an executive vice president (and senior vice president) of Farm Credit West since its founding in 2001. He has been employed in the Farm Credit System since 1984. Mr. Littlefield is a member of Farm Credit West’s Corporate Governance Committee. He serves on the board of Financial Partners, Inc. (Farm Credit technology service provider) where he also serves as the chair of their audit committee.

John C. Boyes, Executive Vice President – Administrative Services Mr. Boyes has served in his current position since January 2014. Prior to that, he served as Executive Vice President – Risk Management & Chief Risk Officer (2011-2013) and as Executive Vice President – Credit Operations since the founding of Farm Credit West in 2001. He has been employed in the Farm Credit System since 1976.



Chris N. Brumfield, Executive Vice President –General Counsel & Corporate SecretaryMr. Brumfield has served in his current position sinceJanuary 2011. Prior to that, he served as Senior Vice Presi-dent-General Counsel since the founding of Farm Credit West in 2001. He has been employed in the Farm Credit System since 1988, except for an 18-month period from 1991 to 1993.

Christopher J. Doherty, Executive Vice President –Fiscal Operations & Chief Financial OfficerMr. Doherty has served in his current position since January 2012. Prior to that, he served as Senior Vice President and Chief Financial Officer since November 2008. He has been employed in the Farm Credit System since 1987, except for afour year period from 2005 to 2008. Mr. Doherty is a Certified Public Accountant (CPA).

Ernest M. Hodges, Executive Vice President –Legislative & Public RelationsMr. Hodges has served in his current position since January, 2014. Prior to that he served as Executive Vice President –Administrative Operations & Chief Information Officer since May 2008. He has been employed in the Farm Credit System since 1973, except for a 24 month period from 1976 to 1978. Mr. Hodges serves as a trustee of Woodland Health CareFoundation, which provides financial support to Woodland Health C6are. He also serves on the California State Fair Agricultural Advisory Council.

William M. Noland, Executive Vice President – ChiefOperating Officer & Chief Risk OfficerMr. Noland has served in his current position since January 2014. Prior to that, he served as an executive vice president and senior vice president of Credit Operations since the founding of Farm Credit West in 2001. He has been employed in the Farm Credit System since 1981. Mr. Noland serves on the Agribusiness Advisory Council for California Polytechnic State University, San Luis Obispo.

Daniel R. Clawson, Senior Vice President – Credit Operations & Chief Credit OfficerMr. Clawson has served in his current position since January, 2014. Prior to that he served as a regional vice president or senior vice president in credit operations since 2008. He has been employed in the Farm Credit System since 1986.

Melanie Johnson, Senior Vice President – Director of Internal AuditMs. Johnson has served in her current position since January 2012. Prior to that she served as Vice President – Assistant Director of Internal Audit since September 2009, and beforethat she was a senior manager for PricewaterhouseCoopers,LLP. Ms. Johnson is a Certified Internal Auditor (CIA) and a Certified Public Accountant (CPA).

Chris Roche, Senior Vice President – Chief Human Resource OfficerMs. Roche has served in her current position since May 2011.From 2006 to 2011, she was a human resources manager for Aerojet Inc., an aerospace and defense contractor. Ms. Roche was also previously employed in the Farm Credit Systemfrom 1993 to 2002 as a human resources director.

Transactions with Senior Officers and DirectorsFarm Credit West’s policies on loans to and transactions with its full-time officers and directors, required to be disclosed in this section, are incorporated herein by reference from Note 13 to the financial statements included in this Annual Report. At December 31, 2013, no loans to Farm Credit West directors or full-time officers, CoBank directors or full-time officers, their immediate families, or affiliated organizations involved more than a normal risk of collectability.

Director and Officer Preferred Stock OwnershipThe following table shows information related to the preferred stock holdings of Association directors.

Farm Credit West has a comprehensive policy dealing with the equitable issuance and retirement of its class H preferred stock. The average preferred stock dividend rate for 2013was 2.00% for all preferred stockholders. Farm Credit West preferred stock policy prohibits ownership of preferred stock by Association employees.

Involvement of Directors and Officers in Certain Legal ProceedingsThere were no matters which came to the attention of management or the Board of Directors regarding involvement of current directors or full-time officers in specified legal proceedings which are required to be disclosed in this section.

Relationship with CoBankThe financial condition and results of operations of CoBank materially affect stockholder investments in Farm Credit West. Copies of the CoBank Annual Report and copies of CoBank’s most recent quarterly financial report are available from Farm Credit West free of charge.

For the year ended December 31, 2013 Year-end (in thousands) Balance Issued Retired

Robert E. Amarel Jr. 108$ —$ —$Gregory O. Dias Jr. 106 12 —Douglas C. Filipponi 110 — (1,800)Robert N. Hansen 398 40 (250)Thomas R. Heenan 193 30 (210) Total 915$ 82$ (2,260)$

Preferred Stock


Edgar A. Terry, Director Term of Office: Mr. Terry has served on the Board since 1992. His current term ends in 2014. During the past five years, Mr. Terry has been involved in vegetable and strawberry production/marketing and has been a Senior Adjunct at California Lutheran University. Mr. Terry serves on the Farm Credit West Corporate Governance Committee and Enterprise Risk Management Committee. He is President of Terry Farms, Inc. (which produces and markets vegetables and strawberries); President of Willal, Inc. (Sales and Marketing); President of Crop Genius, Inc (software development and sales); Vice President of Rancho Adobe, Inc. (lessor and lessee of farmland). Mr. Terry serves on the boards of Terry Farms Inc.; Central AP (real estate partnership); and JJE Managing Partner (real estate management); and Rancho Adobe, Inc. He also serves as the Chairman of the Center for Economic Research and Forecasting, Vice Chairman of the California Strawberry Commission and the Ventura County Fair Foundation and is on the Advisory Board of the Ventura Agricultural Historical Museum. In 2013, Mr. Terry served 17 days at Board and Board committee meetings and 5 days in other official activities on behalf of the Board, for which he was compensated $38,130.

Sureena B. Thiara, Director Term of Office: Mrs. Thiara has served on the Board since 2005. Her current term ends in 2016. During the past five years, Mrs. Thiara has been a partner in Far Horizon Insurance Partnership. She is also a partner in Manseena Orchards Partnership, which leases the family farm of 145 acres of prunes and walnuts, and Pulp Papery. She has also been a crop insurance agent for over 16 years. Mrs. Thiara serves as vice chairman of the Farm Credit West Enterprise Risk Management Committee. In 2013, Mrs. Thiara served 14 days at Board and Board committee meetings and 6 days in other official activities on behalf of the Board, for which she was compensated $35,400.

Cornelius (Case) Van Wingerden, Director Term of Office: Mr. Van Wingerden has served on the Board since 1987. His current term ends in 2018. During the past five years, Mr. Van Wingerden has been involved in the production, shipping, and marketing of fresh cut flower bouquets, potted orchid plants and living lettuce and herbs to supermarkets nationwide. He is a director of Westland Floral Company (producer of fresh cut flowers and potted orchid plants), GroLink Plant Company, Inc./Athena Brazil (propagator of vegetative cuttings), Floral Ambiance, Inc. (shipper of consumer-direct floral gifts), Gallup & Stribling Orchids, LLC (orchid producer), FCCL (refrigerated floral transportation) and Alexander Ranch, Inc. (producer of living lettuce and herbs). Mr. Van Wingerden serves as chairman of the Farm Credit West Human Capital and

Compensation/Evaluation Committee and also serves on the Corporate Governance Committee. In 2013, Mr. Van Wingerden served 17 days at Board and Board committee meetings and 7 days in other official activities on behalf of the Board, for which he was compensated $41,800.

Director Compensation, Travel, Subsistence, and Other Related Expenses Director compensation is under the oversight of the Board’s Human Capital and Compensation/Evaluation Committee. During 2013, each Farm Credit West director was compensated based on an annual retainer paid in monthly installments. The 2013 compensation rates based on position were as follows: Board chair - $46,300; the Board vice chair and Board committee chairs - $40,850; and, all other directors - $35,410. The total compensation Farm Credit West paid all directors for 2013 amounted to $563,000. Directors, senior officers, and other staff are reimbursed reasonable costs of essential travel, subsistence, and other related expenses. A copy of the policy authorizing such reimbursements is available to shareholders upon request. The total amount of reimbursements to directors for travel, subsistence, and other related expenses totaled $59,000, $75,000, and $57,000 in 2013, 2012, and 2011, respectively.

Senior Officers

Farm Credit regulations also require the disclosure of the business experience for the last five years for each senior officer. Required senior officer compensation information is included in Farm Credit West’s Annual Meeting Information Statement, which is available for public inspection at the Association’s offices.

Mark D. Littlefield, President and Chief Executive Officer Mr. Littlefield has served in his current position since January 2011. Prior to that, he served as an executive vice president (and senior vice president) of Farm Credit West since its founding in 2001. He has been employed in the Farm Credit System since 1984. Mr. Littlefield is a member of Farm Credit West’s Corporate Governance Committee. He serves on the board of Financial Partners, Inc. (Farm Credit technology service provider) where he also serves as the chair of their audit committee.

John C. Boyes, Executive Vice President – Administrative Services Mr. Boyes has served in his current position since January 2014. Prior to that, he served as Executive Vice President – Risk Management & Chief Risk Officer (2011-2013) and as Executive Vice President – Credit Operations since the founding of Farm Credit West in 2001. He has been employed in the Farm Credit System since 1976.



Farm Credit West’s statutory obligation to borrow from CoBank is discussed in Note 8 to the financial statements included in this Annual Report. Farm Credit West’s requirement to invest in CoBank capital is discussed in Note 5 to the financial statements included in this Annual Report. CoBank’s role in mitigating Farm Credit West’s exposure to interest rate risk is described in the Liquidity and Funding Sources section of “Management’s Discussion and Analysis” included in this Annual Report.

Relationship with Independent Auditors There were no changes in independent auditors and no material disagreements with the independent auditors on any matters of accounting principle or financial statement disclosures during 2013. In 2013, we paid $161,000 in audit fees to our independent auditors, PricewaterhouseCoopers, LLP.

Financial Statements The financial statements, together with the report thereon of PricewaterhouseCoopers LLP dated March 10, 2014, as well as “Management’s Discussion and Analysis” in this Annual Report, are incorporated herein by reference.

Description of Property The inside back cover of this report provides certain information regarding office properties owned and/or occupied by Farm Credit West at December 31, 2013. The Roseville, Paso Robles, and Yuba City offices are leased. All other properties listed are owned by Farm Credit West. Farm Credit West also owns some commercial real estate parcels adjacent to the Santa Maria, Woodland, Kern County and Templeton offices, all of which are held as investments in land. In 2013, Farm Credit West purchased a land parcel in Yuba City as a potential site for a new office facility. The Yuba City land is included in premises and equipment.

Farm Credit West will ensure The Customer Comes First by providing superior service at competitive rates, in a timely, professional, and ethical manner.

Administrative Office

1478 Stone Point Drive, Suite 450Roseville, CA 95661 916.780.1166800.909.5050

Capital Markets

1446 Spring Street, Suite 201Paso Robles, CA 93446805.237.0998

Carpinteria

1135 Eugenia Place, Suite ACarpinteria, CA 93013805.684.8771

Dinuba

531 N. Alta AvenueDinuba, CA 93618 559.591.9378

Hanford

1111 W. Lacey BoulevardHanford, CA 93230 559.584.2681

Kern County

19628 Industry Parkway DriveBakersfield, CA 93308 661.399.7360

Santa Maria

1178 Tama Lane Santa Maria, CA 93455 805.922.7991

Templeton

175 Cow Meadow Place Paso Robles, CA 93446 805.434.3665

Tulare

200 E. Cartmill AvenueTulare, CA 93274 559.684.1478

Ventura

2031 Knoll DriveVentura, CA 93003 805.477.1020

Woodland

440 Pioneer AvenueWoodland, CA 95776 530.666.3333

Yuba City

900 Tharp RoadYuba City, CA 95993 530.671.1420

Office Locations

www.farmcreditwest.com

2013 Annual Report

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Farm Credit West 2013 Annual Report

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